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Thursday 8 December 2016

Glanbia come out fighting on milk price cut

'We have paid a strong price this year' claims chief executive

Published 28/10/2015 | 02:30

Glanbia's chief executive Jim Bergin
Glanbia's chief executive Jim Bergin

Dairy markets will remain "precarious" over the coming months, the head of Glanbia Ingredients Ireland (GII) has warned.

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Responding to criticisms of Glanbia's recent decision to cut prices by a further 1c/l to 24c/l, the company's chief executive Jim Bergin (pictured) also maintained that GII has paid a "strong" milk price this year.

He said an analysis of milk cheques would show the company was paying 32c/l on average for the entire year, including protein and fat constituents.

Speaking at an IFA meeting in Co Meath last week, Mr Bergin said he had advised the Glanbia board to take the "harsh" decision to cut the milk price to a base of 24c/l, with a 1c/l co-op top up, in response to volatile marketplace conditions.

"We know that it has caused considerable anger, and it caused worry and concern," admitted Mr Bergin.

The Global Dairy Trade index has dipped after recent rises and analysts have warned stocks remain high, particularly in the US and China.

However, Glanbia came under fire at last week's meeting in Navan. Meath dairy farmer Diarmuid Lally said the company had received "cheap milk" all year and warned the current price was a "mile off the mark".

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Cavan IFA chairman James Speares said GII was one of the world's leading processors but it was delivering "the lowest price paid for milk.

"Everybody is talking about it. Big plans going forward - there'll be no need for going forward," he said. "What is the point in keeping all the money off of us now when we're down and hammer us down into the ground now to plan for 2016 and '17 and on ahead."

Mr Lally described the fat and proteins constituents as good for farmers but the base milk price as poor.

"I think the best thing we could do is nearly abort a lot of cows and fatten them for the next few months. That would save you worrying about milk for 2018," said Mr Lally.

Glanbia will have processed more than 280 million litres extra by the end of this year, up 19pc on last year and 126 million litres more than forecast.

Mr Bergin said investment would be required earlier than planned between 2016 and 2019 as milk volumes are "well ahead" of post- quota projections.

He also blasted "myths" about problems at GII's Belview plant in Kilkenny, saying 311 million litres has gone through the €175m plant.

Mr Bergin said any difficulties that occured at the plant were normal for a new facility and it was closing until mid-January in line with reduced milk supply and the weak powders market.

The plant has suffered teething problems with issues with a drier earlier in the year.

"Now Belview is closed until the middle of January and we will work to solve issues that we had through our commissioning phase," he said.

Returning to the milk price issue, Mr Bergin insisted the firm could not overvalue €250m worth of stock and they were determined to only carry a "normal" level of around €108m worth of stock into next year.

Dumping

He said he had concerns about the "significant stock overhang" on the market internationally, with dumping taking place in Africa, and described the current market conditions as weak.

"The focus is on next spring now - our concern will be that the markets will remain weak and at that point farmers will have more cows to feed and will have lower constituents than they have now and will have high costs."

Henry Corbally, the new chair of Glanbia Co-op and Glanbia Plc Board, also felt the brunt of the anger.

But he insisted the company could not follow the "populist" line on milk and must ensure the company "lives to fight" another year.

Meanwhile, the higher than expected increases in milk volume means GII is set to expand cheese facilities sooner than expected in 2017, with further investments expected.

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