The changes agreed at the Ornua board meeting this week strip out the “Kerrygold bonus” into a separate payment, and increases the assumed processing costs from 6.5 to 7c/litre. Essentially, these changes will bring the indicative PPI value down 0.9c/litre compared to previously published figures (See Figure 1).

When converted, the PPI is an indicative value of what dairy commodities sold by Ornua are making on world markets. For the last 18 months, most member co-ops have been struggling to return the PPI price announced by Ornua. The changes introduced this week make it easier for member co-ops to meet the indicative Ornua milk price.

International benchmarks

Speaking to the Irish Farmers Journal, Ornua CEO John Jordan said: “The processing cost increase has been established based on international benchmarks, costs from individual processors, an independent report and our own Kerrygold Park investment facilitated by an external consultant.”

The independent report will not be made public. Similarly, calculations for assuming processing cost increases will not be published.

In a further change, rather than paying out the Ornua member bonus at year-end, it will now be paid out on a monthly basis. The changes were agreed at board level and no vote was needed to agree the changes.

Farm organisations not happy

Following the Ornua board meeting this week, IFA president Tim Cullinan said that farmers are disappointed with the decision by Ornua to amend the PPI.

He said: “In particular, farmers can’t understand the increased allocation for processing costs, despite the investments made in modern processing facilities.

“With over 50% more milk going through more modern plants, farmers cannot understand how costs are increasing when increased throughput should reduce them,” said Cullinan.

IFA dairy chair Tom Phelan sits on the Ornua board.

The statement from ICMSA this week pointed to the fact that no independent review had taken place on increasing processing costs.

There should be no changes in the processing cost used in the PPI calculation

The ICMSA statement said: “It is simply unacceptable that adjustments can be made based on data provided by processors without any independent oversight and ICMSA’s position was made clear at every level and at every stage.

“There should be no changes in the processing cost used in the PPI calculation until a full, independent assessment of processing costs in Ireland is carried out in a clear and transparent way.”

ICMSA president Pat McCormack sits on the Ornua board.

Co-op members that sit around the Ornua board table include Carbery, Arrabawn, Aurivo, Glanbia, Dairygold, Tipperary Co-op, North Cork and Lakeland Dairies. Representatives of the IFA, ICMSA and ICOS also sit at the board table.

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