Dairy sector suffering from strong sterling
The strength of sterling is making the export of Northern Ireland’s dairy produce difficult, according to Lakeland Dairies CEO, Michael Hanley.
The current strength of sterling is significantly hampering the efforts of processers to deliver better farm gate milk prices in Northern Ireland, according to Lakeland Dairies CEO Michael Hanley. He made this assertion, courtesy of his address to the 2015 agendaNiagri-food conference.
“Sterling has strengthened considerably against the Euro over recent months,” he said. “This has led to a scenario where exports from Northern Ireland have been out of kilter with equivalent products from the Euro zone by as much as 4.5 pence per litre. This is a cost which must be factored in by processers as they plan for the future.”
Hanley claimed that at present, the world is still suffering from a dairy over supply but suggested that the real damage in this regard took effect in 2014. In turn, a combination of the downturn in demand in China, allied to Russia’s ban on EU food produce has only added to the pressure felt by local dairy producers according to Hanley.
However, Hanely was also able to deliver some much needed good news as he confirmed the recent downturn in New Zealand’s milk output and the upturn in prices paid at the last Fonterra milk auction. “These trends must be maintained, if they are to make a real difference in terms of the milk price paid in Northern Ireland,” he said. “The production capacity of Europe and the United States must also be factored into the milk price equation, as both regions are now significant exporters of milk.”
Lakeland Dairies exports dairy products to 70 plus countries around the world. The co-op is headquartered in Co Cavan but has its new Global Logistics’ Centre operating from Newtownards in Co Down. “Our mission is to create long term sustainability for our milk producers through value-added processing and export led growth,” said Hanley.
“This requires the right economies of scale, the most competitive processing plants in the industry and the achievement of total efficiency across all of our operations. We are very pleased to acknowledge the expertise and support we have received from Invest NI for our new flagship development in Newtownards.
“Due to the technologically advanced capability of our plants, we have a constant flexibility to divert milk into the highest value dairy product categories.
“Our new Global Logistics Centre will give us a further competitive advantage as we continue to serve our customers throughout the world and target new market development opportunities in the interests of our producers.”
Hanley sees the recent joint ventures agreed between Lakeland and Fane Valley co-op as further evidence that the Irish dairy sector, as a whole, is investing effectively for the future. The deal will see the establishment of two, new joint venture businesses. One will be solely involved in dairy processing: the other will combine the co-ops’ existing feed compounding interests.
“Success in today’s increasingly competitive dairy processing sector is all about delivering efficiencies of scale and optimising product quality. The new dairy joint venture with Fane Valley will allow us to achieve this core objective,” he said.
“The new business will have access to an annual milk pool in excess of onw billion litres. The reality is that we cannot keep up with demand from customers at the present time. There is a commercial market for every drop of milk that we process. I am totally confident that we can grow the business further during the period ahead.
“World dairy markets will turn. And we may be seeing the start of this process already. There is a bright future for dairy farming in Northern Ireland. It must be based on a scenario which sees farmers receiving a realistic return for the milk they produce.”
