The dairy industry in Ireland is currently facing a significant threat to its survival, as a price war on milk products initiated by supermarkets is causing concerns among dairy farmers.
Several major retailers, including Lidl, Aldi, SuperValu, and Tesco Ireland, have recently reduced the prices of their own-brand milk products. For instance, the price of a two-litre carton of own-brand milk has been reduced from €2.19 to €2.09, and Aldi has implemented an average price cut of 10 cents across all its own-brand milk products.
This ongoing price reduction is exacerbating the already challenging conditions faced by dairy farmers, with many forced to leave the industry due to high costs. The Irish Creamery Milk Suppliers Association fears that more family dairy farms will collapse as a result of this price war.
It is crucial to examine the causes of this price reduction and the challenges and concerns it poses to the dairy farming community in Ireland.
Impact on Farmers
The ongoing milk price war poses a significant threat to the survival of dairy farmers. Reduced prices of own-brand milk products by Lidl, Aldi, SuperValu, and Tesco Ireland, coupled with increasing production costs, are driving many farmers out of business.
The price of a two-litre carton of own-brand milk has been reduced from €2.19 to €2.09, and Aldi has decreased prices of all own-brand milk products by an average of 10 cents. This price drop is exacerbating an already dire situation for dairy farmers, as the farm gate price of milk is not covering production costs.
Input costs for farmers, including fertiliser and diesel, have increased by almost 25%. Higher electricity prices and refrigeration costs are further squeezing farmers. It is unclear if farmers’ payments were reduced by SuperValu, and Tesco did not provide any comment on the matter.
Causes of Price Reduction
One of the causes behind the reduction in prices is the ongoing competition among supermarkets. Lidl, Aldi, SuperValu, and Tesco Ireland have all reduced the prices of their own-brand milk products in an effort to attract more customers. For example, the price of a two-litre carton of own-brand milk has been reduced from €2.19 to €2.09. Aldi has cut the prices of all its own-brand milk products by an average of 10 cents.
While this may benefit consumers in the short term, it poses a significant threat to dairy farmers. The price of milk has dropped nearly 30% from last year, and the farm gate price is not covering production costs. As a result, many farmers are unable to repay bank loans and are being forced out of business. The sustainability of the dairy sector is at risk if farmers are not paid enough for their products.
Challenges and Concerns
Competition among supermarkets and the resulting reduction in prices has raised concerns about the long-term viability and sustainability of the dairy industry, particularly for those involved in milk production.
Dairy farmers are facing numerous challenges and concerns as a result of the ongoing price war. One major concern is that the farm gate price of milk is not covering the production costs, leading to significant financial strain on farmers. This has already resulted in around 500 farmers leaving the industry in recent years.
Additionally, the price of milk has dropped by nearly 30% from last year, further exacerbating the financial difficulties faced by farmers. Another worry is the uncertainty surrounding who will fund the price cut. While milk processors are likely to take their margin, leaving farmers with lower prices, it remains unclear if supermarket price reductions are being passed on to farmers.
Rising input costs, such as fertiliser, diesel, electricity, and refrigeration, have further squeezed farmers’ profitability, making it even more challenging for them to make ends meet. As a consequence, some farmers may be forced to fold, unable to repay bank loans or sustain their operations.
The sustainability of the dairy sector is at stake if farmers are not adequately compensated for their production efforts.
