APPENDIX 41
Letter to the Committee Chairman from
Mr Oliver Dowding, Shepton Farms Ltd (F 63)
I wanted to write and make an observation on
the organic milk price, which you may find useful in your ongoing
Agriculture Committee inquiry into Organic farming. My point relates
to Iceland supermarkets, whom you are probably aware wish to challenge
the existing organic premium prices and sell their organic ice-cream
at conventional prices. My observation goes beyond the obvious,
ie they are selling a very high end value product that utilizes
relatively little basic ingredient in its manufacture.
Iceland has observed to me that they think it
should be possible to produce organic milk at 25p/l. I disagree,
on the following simple basis.
Promar, who are probably the country's leading
dairy consultant's and costing analysts, state that few—if
any—producers will be making a profit at 21-22p, for conventional
milk. The largest producers may be making approx 1.5p, on a milk
price of 19.2p, but this has to cover capital replacements, private
drawings, family labour, debt repayments etc. The herd represented
by this sample are larger and more efficient than the majority.
We have to bear in mind that if the milk price
rises, there are a lot of others in the supply chain to agriculture
who have been under pressure and will be wanting to raise their
prices at the first sign of more to draw from! Unfortunately,
this includes the milk quota lessors, and with 20 per cent of
milk produced on leased quota you can see how fast this money
will disappear.
However, if we assume that conventional milk
did get back to 24p, then a 25 per cent premium is going to leave
organic at 30p/l. So, our price is not out of line, and surely
any suggestion that others can do it cheaper is not based on realism,
but a speciality, niche, and highly profitable product. As you
will be aware, Irish conventional farmers are receiving something
near 28p/l and the country is 600 per cent self-sufficient! Again,
30p/l for our organic seems excellent value.
5 October 2000
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