In recent weeks, these pages have repeatedly featured the plight of farmers who have a significant proportion of their milk in fixed price schemes. These farmers are very exposed to the changed landscape that is farming following Russia’s invasion of Ukraine.
And credit where credit is due, Lakeland’s response has been comprehensive, paying an extra 8c (or 7p in Northern Ireland) for every litre of fixed-price milk for eight months (April to December). It brings the price from 32c/l up to 40c/l – about breakeven price currently.
Farmers mightn’t make money on this milk, but at least it pays for itself, and they don’t have to subsidise it with their remaining milk, which must also pay all bills.
For an average 85-cow spring-calver herd with one-third of their 500,000 litres of milk fixed, it will be worth about €13,000.
Some might say that it was an easy gesture for Lakeland to make, as a relatively small proportion of farmers and milk volume is so affected. It would cost processors over €100m to add 8c/l to all fixed milk. That isn’t possible.
But the central point is that a farmer co-operative lived up to its founding principles, and moved to protect a vulnerable set of members.
It’s now highly likely that we are facing some years of very high costs
Glanbia has more milk in fixed price schemes than all the other co-ops put together.
The 3c/l payment increase announced for April will be welcomed. It would equate to around €1,300 of a milk price increase for our average farmer.
However, is paying all farmers this bonus necessary when unfixed milk is clearing 15c/l over costs? Perhaps the board needs to show more political bravery.
It’s now highly likely that we are facing some years of very high costs. Proposals that require farmers to fix into 2023 and 2024 are no longer a viable solution.
Most co-ops have taken some steps, showing that the co-operative model is functioning in these challenging times. But the problems are deep, and farms will be lost unless Lakeland-scale solutions emerge elsewhere
One final point
An average-sized dairy farmer who loses €30,000 this year because they sold milk forward will be tortured by that knowledge. It will sit on them every time they enter the parlour. And that’s perfectly understandable.
If the same farmer didn’t buy fertiliser or feed forward last autumn, they have lost at least €15,000 in increased costs. And yet that doesn’t hurt in the same way.
It seems farmers are much more affected by selling too cheaply than buying too dearly.
I’m reminded of the old adage for any cattle finisher, “sell the day you buy”.
Farmers will have to buy inputs the day they sell their milk, meat or grain.