Under a new “volume metric flexible programme” Ornua has offered its dairy processor members a price increase on 10pc of their fixed volume contracts in place for 2022 and 2023.
It comes as some processors recently announced supplementary payments on existing FMP contracts, whereby some suppliers are caught on milk prices up to 20c/L behind current variable prices, to alleviate acute inflationary pressures on farm inputs.
Speaking to the Farming Independent, Ornua CEO John Jordan said: “We absolutely recognise that there are genuine hardship cases of farmers, and farm families, that have financial stress, and indeed mental strain, from the situation they’ve found themselves in.
“It is incumbent on everybody, in the spirit of co-op, to step up and support those people.
“As a co-op, we have offered a volume metric flexible programme to our members so where we have fixed volume contracts on products with our members, we’re offering to increase the price on 10pc of that volume for 2022, and then we’ll take that same volume next year at that same increased price.”
The support is being funded by Ornua. It is entirely separate to the payment supports recently brought in by individual dairy processors. We buy the product, cheese, butter, powder, and what we’ve done is amended an offer of flexibility around those contracts to all our co-ops.”
It’s understood discussions are ongoing between Ornua — which is responsible for about 32pc of the country’s annual milk pool under fixed volume — and its processor members on their intentions to take up the offer.
It comes as Ireland’s largest exporter of dairy products recorded an operating profit of €153.7m for 2021, up 1.3pc.
Marking 60 years in business, Ornua also reported “excellent trading performance” for last year with Group turnover up by 6.9pc to €2.5bn.
Kerrygold volume growth is up 12pc, with more than 11 million packets of butter and cheese sold globally each week. Strong returns were also reported for Irish dairy farmers across 389,000mt of Irish product purchased, delivering an additional €78m in Ornua Value Payment to member suppliers, up 13.5pc year-on-year.
Asked about the distribution of profits in the dairy sector given the ongoing impact of rocketing inflation, Mr Jordan said: “If you look at our retained profitability level it’s a very, very, modest figure for the scale of business. So, we’re very confident that we’re paying very good product price and paying additional returns in the Ornua Value Payment.
“On future milk production in Ireland, and the climate action, sustainability piece, certainly the forecast is that there will be slower growth.
“On the economics of global dairy markets, demand is reasonably robust, but supply has been weak, so in the simplest economic terms that means prices go up.
“We don’t see any immediate increase in supply and, as long as demand stays up through China, it means prices would be at these sorts of levels or they might soften a little bit between here and year end.”
