Crash in global dairy markets

He explained:“And prices could drop further. No one is in a position to predict by how far markets will fall while the current turmoil lasts. Dairy markets have crashed.”

Johnston continued: “The last time that dairy markets nose-dived was in 2015/2016. Producer prices dropped to 17.25 pence per litre in June 2016. The disruption back then was caused by a fundamental supply:demand imbalance on international markets. But this time around, we are talking about a fundamentally different scenario unfolding.”

The Dairy Council representative attributes the current crash in dairy prices to the complete shut down of the food service in the wake of the Covid-19 restrictions, adding: “The food service accounts for between 33% and 50% of the sales normally generated by local dairy processors.

“The situation facing both dairy farmers and processors is critical. Government must step in now and come forward with a realistic support package for the entire milk industry.”

Johnston confirmed that agriculture in Northern Ireland is eligible for European Union support measures up to October of this year.

He commented: “But Brussels has been to slow to react. And I am deeply concerned that the government in London is conveniently using the inactivity on the part of the European Union as an excuse not to push forward with its own support measures.

“However, I am encouraged by the fact that Northern Ireland’s farm minister Edwin Poots has totally accepted the scale of the crisis now impacting on the farming and food industries. I know that officials in the Department of Agriculture, Environment and Rural Affairs are advising London on the scale of the emergency now unfolding within the dairy sector. But the time for talking is over: we need action now.”

Meanwhile, Lakeland Dairies has confirmed that the co-op’s farm suppliers in Northern Ireland will receive a base price of 23.75p/litre for March milk supplies.  This represents a reduction of 1.5p/l on the February price.

In the Republic of Ireland a price of 30c/litre (including VAT) will be paid for milk supplied in March. This represents a reduction of 1.81c/l on the February price.

Commenting on the price a Lakeland Dairies’ spokesperson said the fallout from COVID-19 is having a dramatic impact on the dairy markets, adding: “As the COVID-19 pandemic has continued across the globe the global dairy markets have collapsed.

“The food service sector across Europe has suffered near wipe-out following the closure of restaurants, cafes, hotels, while airlines have grounded many planes. Food service is an important route to market for Lakeland Dairies and many dairy processors across Europe.”

Responding to these fast moving events, the Ulster Farmers’ Union (UFU) Dairy Committee dairy committee has called on the government to take immediate action. 
Committee chairman Mervyn Gordon said: “There is not going to be one single solution or ask that will safeguard our dairy industry from the fall in farmgate milk price. This is why we’re asking for a toolbox of options that will cover the short and long term, ensuring that the local dairy sector has a chance of coming out the other side of this pandemic in a sustainable position.”
Mr Gordon said the first option is for government is to provide a top-up to supplement any drop in the farmgate milk price, adding: “We have a specific mechanism in mind which we have devised, and this will aim to protect dairy incomes in the immediate term.  We have told government that there will be a need for an immediate injection of cash on farms.”
Another option generated by the UFU dairy committee, would be in the form of a government buying scheme. A longer-term tool would be a UK specific intervention measure. This would be for distressed milk and designed to take product off the market for a limited time. It would be a UK funded measure with product put into store in Great Britain and Northern Ireland.

Mr Gordon concluded: “Northern Ireland’s dairy farmers were struggling even before this pandemic hit. The prospect of any drop in price, let alone any prolonged period of low prices will have a devastating impact on our sector if Government does not act urgently.”

Dairy farmers from across Northern Ireland have been in touch with Farming Life over the past few days, all highlighting the enormous economic challenges now confronting their businesses.

A number of Lakeland suppliers claim that the co-op had no justification to cut the March base price in Northern Ireland. These assertions take account of the 30c per litre price paid in the Republic of Ireland, the VAT element included in that milk price and the average Euro: Sterling exchange rate of the past 30 days.