Co-ops to process over a billion litres of milk in €670m joint venture
Published 06/08/2015 | 02:30
One of the largest co-ops in the State, Lakeland Dairies, has struck an agreement with a Northern Ireland business, Fane Valley, that will see them process more than a billion litres of milk in a €670m joint venture.
The move between the Cavan-based processor and the Co Down co-op will also see the merging of their feed manufacturing, sales and stores into a major agribusiness company with projected revenues of €175m.
The farmer-owned co-ops highlighted that the new joint ventures would ensure improved competitiveness, greater efficiencies and stronger buying power.
It also signalled that it may go a step further and put a full merger of both co-ops to a members' vote in the future.
It comes at a time when milk prices have plummeted by a third since last year, with farmers in Northern Ireland blockading supermarkets over plunging prices in recent days.
The Irish Farmers' Association's (IFA) dairy chairman Sean O'Leary said he had been calling on processors to carefully examine their efficiencies at a time when prices are under pressure.
"We'd be urging co-ops to look at synergies, joint ventures or to work closely with other co-ops in the best interests of suppliers to be able to give farmers higher prices for milk," he said.
Mr O'Leary also said with the recent merger of Town of Monaghan and Ballyrashane co-ops, it was a clear signal that more consolidation was likely in the dairy sector.
"It is a further signal again of the pressure that is there in the marketplace," he said. "All co-ops are going to be looking to save on prices when prices are low. Volatility is going to be part and parcel of the future. We're going to need lean operating businesses."
John Comer, president of the Irish Creamery Milk Suppliers Association (ICMSA), said the decisive point for suppliers would be whether the joint ventures will result in a better milk price being paid to farmers.
Michael Hanley, chief executive of Lakeland Dairies, said the move underpinned the aim of both co-ops to provide the highest possible milk price to producers.
Lakeland Dairies currently collects and processes from more than 2,100 suppliers providing more than 470 million litres of milk in the southern counties, with a further 330 million collected in Northern Ireland. The volume of milk powder it produces will rise from 90,000 tonnes to 130,000 when a new €36m milk dryer at Bailieboro is completed.
However, the joint venture, managed by Lakeland, will be worth an estimated €670m a year, processing more than 1.1 billion litres of milk and delivering 160,000 tonnes of milk powder.
Lakeland processes almost 10pc of the milk pool south of the Border. However, combining the milk collected by Fane Valley, they would have the equivalent of a fifth of the pool. Since the removal of quotas, the volume of milk sent to Lakelands has increased by 10pc.
The agri-business joint venture merging manufacturing and stores will be managed by Fane Valley, which produces 310,000 tonnes of feed a year.
The co-ops said there would be no job losses, with 930 people in total employed.