UNITED Dairy Farmers’ chairman John Dunlop has told Farming Life that the feedback received from the co-op grass roots’ membership, following this week’s decision by board members to end the monthly milk auction, has been extremely positive.
“Farmers are simply interested in knowing what price they are going to get for their milk,” he added.
“In the future we will be entering into discussions with individual buyers and once these negotiations have been settled and agreed invoices sent out, the United Board will be able to agree on the price which the co-op’s members will receive.
“This is the way all other milk buyers conduct their business, so why should we be any different? United’s individual members will be notified, most likely by text, as to the base price they will receive for their milk, prior to the monthly cheques being issued.”
On Wednesday of this week, United Dairy Farmers (UDF) confirmed that it will no longer be using milk auctions to sell its milk. As a consequence of this decision, there was no February auction, which had previously been planned for Thursday past.
Mr Dunlop further confirmed that United members were unhappy that the auction had not been delivering a competitive milk price in the Northern Ireland market place, especially during the spring and early summer peak production period.
“Members were also unhappy with the volatility of the milk price and their inability to predict their milk price beyond the month ahead,” he further commented.
“The auction has served us well since deregulation, however over the last year there has been considerable change in the local market for ex farm milk with a number of processors now sourcing more of the milk they buy directly from farm, and the amount of milk that United has for sale reducing because of farmers leaving our coop to supply other milk buyers. At the same time more milk is being offered for sale from other sources, including other Co-ops and milk being traded into NI from RoI and GB, especially during the peak period. All of these factors have created a market environment where the auction is less suitable as a selling process than previously,” said Mr Dunlop.
“United was the only milk seller in the world, that we are aware of, that was still using an auction process to sell its milk. We will now be setting our milk price by direct negotiation with individual customers/buyers in the same way prices are set for the final dairy produce such as powder, cheese, butter, liquid milk etc. We expect that normal bilateral negotiations with milk buyers will be more flexible, achieve more stable prices, and avoid the various problems with the auction, especially during peak supply periods. As a co-op, United’s board is mainly made up of elected farmer members who ultimately oversee the selling arrangements of members’ milk. As supplying farmers themselves, board members are well placed to provide the assurance that members are getting a competitive market price for their milk.”
Responding to a question on whether there would be less transparency about how United sets its milk price, Mr Dunlop said:“There will be no loss of transparency by moving away from an auction process. The key transparency issue for farmers is to be able to benchmark the price they receive from their milk buyer against other buyers in the market place to ensure they are receiving a competitive price. The various milk price leagues published in media and online mean that there is more transparency than ever before on what milk prices are being paid. Thus farmers will remain well informed on the key issue of whether United’s milk price is competitive in the market. United needs to pay a competitive milk price to retain its members and the milk it needs for its own processing activities.”
Responding to this week’s developments Ulster Farmers’ Union President Harry Sinclair said: “We have consistently argued that there was not sufficient transparency in the auction system. A transparent auction would have provided data such as who participated, quantities they were buying and how much they were paying. These are the essential ingredients that will help producers better understand the market that they are producing for and assist in the decision making process on the sale of their milk.”
Mr Sinclair continued: “This move by United Dairy Farmers will only create further volatility and uncertainty unless it is addressed immediately and there is a replacement system put on the table. At the end of last year, the UFU and Dairy UK NI developed and agreed a Voluntary Code of Practice specific to Northern Ireland which aims to improve trust and transparency between producers and processors. In addition, the UFU have been working on a system to price milk and have constructed a pricing mechanism which could be used to establish the value of milk on-farm. We believe that the Voluntary Code of Practice and pricing mechanism could be an ideal vehicle for moving the local milk industry forward and increase transparency in milk pricing.”
The UFU has called for meetings with all processors as soon as possible to discuss how the industry will go forward and urge that the Voluntary Code of Practice is implemented as soon as possible.
Farmers for Action’s William Taylor said that the United Board should have sought the ratification of the co-op’s membership before pushing ahead with the decision to terminate the auction.
He added: “The demise of United Dairy Farmers monthly milk auction is a sad day for not only Northern Ireland dairy farmers but European dairy farmers as this was the only ‘transparent’ auction anywhere in Europe and possibly the world.
“The auction was originally set up after the demise of the Milk Marketing Board as a tool to properly represent the market back to United Dairy Farmers’ members.”