Uncertainties remain for years ahead

DAIRYGOLD CO- OP CEO Jim Woulfe has pointed out that 2016 ended with a more positive outlook for milk prices but that some uncertainties remained.

“2016 was a year of two halves as far as dairy markets were concerned”, he said. “The first half saw continued volatility with declining market returns but as we moved into the second half we began to experience a change in the market dynamic, with global milk output slowing down across all regions except for the USA, where cheap feed inputs continue to be a stimulus to drive milk production. The slowdown in milk output helped to generate market demand and global dairy prices rose slowly but steadily from a very low base.”

However, while overall import figures for the major dairy importing countries did recover and 2016 ended with a positive outlook for milk prices, concern remains in relation to the overhang of dairy stocks, and milk powders in particular.

Dairygold responded to this improvement in market conditions with immediate milk price increases, according to Dairygold Chairman James Lynch. “From July 2016 onwards Dairygold implemented seven milk price increases in anticipation of continuing improvement in market returns. Dairygold also ensured that support was made available to our grain suppliers against the impact of the ongoing depressed international grain market following a difficult harvest. In addition, Dairygold negotiated lower cost loans and credit facilities for members with both AIB and Bank of Ireland.

MILK PRODUCTION EXPANSION

The post quota milk production expansion across the Dairygold catchment area has exceeded original forecasts with the Society witnessing a 24% increase in milk volumes for 2016 at 1.2 billion litres when compared to 2014, the last full year of quota restrictions and a 44% increase on the Harvest 2020 (Government Strategic Plan) base year of 2009.

Dairygold milk supplier forecasts are that by 2020, milk supply will be approaching 1.5 billion litres per annum.

GLOBAL MARKET CHALLENGES

While welcoming the generally more positive global market conditions for dairying Jim Woulfe pointed to external factors which will present significant challenges in the period ahead.

BREXIT

“With the formal triggering of Article 50 of the Lisbon Treaty by the UK, we are now on a path towards Brexit which will have a profound impact on the Irish dairy and food industry regardless of how ‘soft’ or ‘ hard’ it may be”, he said. “We and the industry, with Government involvement, need to collectively address the specific challenge relating to cheddar cheese, with more than 60% currently being exported into the UK market. We must continue to pursue strategies to diversify markets and to continue to add value to our output, to minimise the impact of Brexit.”

SUSTAINABILITY

Central to the growth plan is the sustainability agenda. All investments in the processing platform are focused on reducing energy and water usage, improving emissions while at the same time providing milk suppliers with best in class dairy processing capability.

Dairygold is working with its milk suppliers to deliver sustainability initiatives at farm level and striving to achieve full milk supplier participation in Bord Bia’s Sustainable Dairy Assurance Scheme, which involves milk suppliers completing a carbon emissions assessment.