THE FINANCIAL consequences of dairy farmers being in fixed price milk contracts “haven’t gone away”.
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Some dairy farmers in Limerick are losing ‘on the double’ due to fixed price milk contracts
There is a lot of head scratching over fixed price milk contracts

In fact, the effects could last for years to come.

Limerick IFA is calling on Kerry Group to do more for its suppliers in the county.

John Hannon, Limerick IFA dairy chair, said Kerry Group’s announcement last week of an ex-gratia payment of 2 cent a litre for fixed milk price contracted farmers for the month of September only was welcome.

However, Mr Hannon said “a lot more needs to be done for this cohort of farmers”.

“This 2 cents offer only amounts to 0.5 cent over the entire milk supply for the period from March this year,” said Mr Hannon, who added that when you compare it to the annualised ex-gratia payment made to Dairygold suppliers of 6 cents, Kerry “still has some way to go”.

In Limerick, there are a few hundred farmers tied into fixed milk price contracts. The level of contracts vary from 20% of 2022 volumes to greater than 50% in the most impacted cases.

“The year 2022 has been a double blow for these farmers because of the massive increase in the cost of farm inputs, especially fertiliser, energy and feed. It is estimated by Teagasc that the cost of milk production has increased by at least 10 cent this year. There is no doubt that these farmers are losing on the double this year – sales revenue is down and costs are up,” said Mr Hannon.

There has been no response to a media query sent to Kerry by Limerick Live which reported on fixed milk price contracts last May.

They were described as a safety net but a massive hole has appeared in them and many Limerick farmers are falling into financial difficulties.

One Limerick farmer signed a contract in late 2021 for 80% of his milk at 38cpl to run from March to October 2022.

Back then milk prices were hitting 50cpl – now the base price is closer to 60cpl. In May of last year it was around 34cpl.

Hindsight is always 20-20 but locking in at 38cpl last October seemed like the safe call. Especially in the context that over the last 20 years milk generally only moves up or down a maximum of 4cpl in a year.

“I wanted to be sure I could pay the bills, cover the costs and have a livelihood but instead it is after crucifying me,” said the farmer, who didn’t wish to be named but is speaking for many in who are in a similar position.

“I am losing money at the moment. I went to my accountant and he said, ‘I know you won’t do it but from a professional point of view (but) sell the cows, sit on the money and your asset will remain. If you milk the cows for the year you potentially are going to end up working for the whole year without any income’,” said the farmer.

The more people he has spoken to the more he has found out are “stuck with it”. He estimates the level of exposure among Limerick farmers runs into millions of euros.

“A lot of the lads are ashamed to say it as if we were half stupid and worried the neighbours would be laughing at us.

“There are farmers in serious financial difficulty. There are potential bankruptcies from this. Some could lose their farms,” he said.

The quality rating of domestic dairy products has remained above 99 percent for six consecutive years, experts said at a webinar.

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