Grocery price war could have major impact on milk production, says IFA

The Irish Farmers' Association (IFA) has warned that any grocery price war between retailers involving milk could have a major impact on milk production.

It comes as all of the major grocery retailers have reduced the price of their own-label milk products in recent days.

IFA President Francie Gorman said: "While consumers might be glad to see cuts in retail milk prices, they should be aware of the potential consequences of retail price wars.

"Ireland's fresh milk is provided by a small cohort of farmers who have signed a contract to produce milk 365 days of the year. This means they have higher production costs and must milk their cows every day of the year.

"These farmers receive a modest premium over the price for manufacturing milk. This is to cover the extra costs and commitment required of them."

The IFA said higher costs at farm level have already resulted in many farmers exiting fresh milk production, adding that the number of producers has fallen by 34% in the past 10 years and now stands at around 1,200 suppliers.

Mr Gorman said farmers will be "very concerned to see cuts to fresh milk prices being trumpeted by retailers".

"The real fear here is that this will be the start of a PR campaign by retailers where they use price cuts on a small number of fresh food items to attract customers into their stores to buy other products with much higher margins," he added.

Meanwhile, IFA Liquid Milk Chair Henry Dunne said there is a "real danger that fresh milk producers will cease to sign year-round contracts".

"Instead, they will send their milk for manufacturing and will be free to dry off their cows over the winter," he said.

Mr Dunne also said a price war "would threaten the viability of a very vulnerable sector" and farmers are asking consumers "to prioritise the purchase of farmer/co-op owned milk brands".

The milk-price reductions come amid strong global milk supply that has seen co-operatives reduce the amount they are paying dairy farmers per litre for their milk.

Aldi has confirmed it is absorbing the cost of the price reduction, while Tesco said it does not "comment on the details behind our commercial decisions".

Other retailers have not confirmed how the reductions are being paid for.