“But this will be a balancing act,” he said.
“Yes markets have improved over recent months, and we want to reflect this upturn in events to our farmers. But at the end of the day, we can only pay what the market is delivering.”
Mr Whelan made these comments while explaining the scope of the Dale Farm milk production incentive scheme and the winter price premium, the details of which were communicated to all the Co-op’s members by letter earlier this week.
The scheme will see the Co-op pay an extra 2p/litre above base on all milk supplied during October, November and December. In addition, members will receive an extra 4p/litre on all extra milk produced during the period of the winter premium period, comparing output during October, November and December of 2016 with the comparable months of the previous year.
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However, as United’s milk throughput has dropped by 4.3% over the past year, this reduction will also be factored into the base volumes used for the purposes of the production-based price incentive calculation.
So for example, if a producer produced 100,000L in October 2015, the base volume used to determine the bonus paid for October 2016 milk supplies will be 95,700L: ie 100,000L less 4.3%.
Mr Whelan also pointed out that the winter premium for 2016 includes the month of December: in the past only the October, November period was covered. In addition, the production-based price bonus is totally open-ended.
“We want more milk from our members,” he said.
“Our aim is to maximise the efficiency of our processing plants to help pay a better price to our farmers.”
Mr Whelan links the upturn in dairy market sentiment to a number of factors. These include the impact of the EU intervention scheme for skimmed milk powder, the recent devaluation of Sterling against the Euro and the more positive economic signs coming out of China.
“But we are not out of the woods yet,” he said.
“The EU has intervened the equivalent of 2% of total European milk output this year. But at some stage in the near future, this product will come back out on to the open market. What’s more, the Russian import ban on EU food imports is still in place. And while this remains the case, it will continue to apply significant downward pressure on world dairy markets. Also, we can’t overlook the fact that dairy farmers in the United States have the potential to significantly increase milk output volumes further, should they choose to do so.”
Mr Whelan confirmed that Dale Farm/United will host a series of four farmer meetings over the coming fortnight for Co-op members.
“They will provide us with an opportunity to discuss the detail of the winter premium scheme,” he commented. “And I want to listen to our members.”
He concluded: “I fully recognise that the prices paid to dairy farmers over many months have not been sustainable.
“This year’s winter premium scheme has been designed to reflect recent upturns in world markets and reflects our ethos of giving all we can to our members in terms of milk price.”
Meanwhile, Ulster Farmers’ Union (UFU) dairy chairman, William Irvine, has welcomed the Dale Farm winter price premium scheme. He said that since United was the biggest buyer of milk here, it was encouraging that farmers were set to gain from a policy that reflected what was happening on dairy markets.
Mr Irvine added: “It seems ironic that as the EU’s Voluntary Milk Production Reduction Scheme is being implemented, United finds itself in the position of needing more milk to satisfy the business it has through its Dale Farm brand. This is encouraging news for producers – and I hope other processors will follow United’s lead to allow farmers to benefit from what is happening on national and global dairy markets.”
The UFU has recently completed a series of meetings with local dairy processors encouraging them to pass the recent commodity price gains on to producers. Mr Irvine said he was hopeful the winter ahead would bring the combined prospect of higher milk prices and manageable costs.
“It is encouraging to see developments like this,” he continued.
“Price improvements will boost farmers’ confidence. But there is a long way to go before the industry is back on an even keel. Part of this is clearing the huge debts that have built up operating below the cost of production for such a long time. However, farmers are positive by nature, and they will see this move by United as a big step in the right direction.”