Kerry Group boss predicts milk price rally but warns of more volatility ahead
Published 07/10/2015 | 02:30
The head of international food giant Kerry believes the worst of the "scare" in milk prices is over but there will be further cycles of volatility.
Prices to dairy farmers have dropped from the highs of around 38c/l last year to 25c/l, with a falloff in demand from China and the Russian embargo also having a knock-on effect.
Speaking at last week's launch of the Kerry Group's €100m technology and innovation centre at in Naas, company CEO Stan McCarthy said that the market had overreacted and the recent rise in the Global Dairy Trade auctions was a sign of the correction.
The market was beginning to slowly recover, but he added it would be the "back half of 2016" before the price for milk reaches a more "acceptable level".
"Volatility will not disappear and there will be other cycles and we have to learn from it and know how to manage our way through it but perhaps the worst is over, the scare is over. We can be a bit more optimistic," he said.
"I think one has to recognise that the processors staggered the real market and that of the farmers, if you were following the price paid to farmers with the exact market then you would have a much worse situation," he said.
"It will just take a little while for that situation to correct itself."
He said the sector had made the right decision by supporting the prices as they needed farmers to continue to produce milk to support the business model.
Agriculture Minister Simon Coveney described the dip in prices as a "temporary problem", as he outlined the measures underway at EU level, including the aids to private storage, to help the sector.
His comments followed the first meeting of the Dairy Forum where he stressed the various measures to help protect against volatility.
These include creating premium products, offering fixed price contracts to farmers and creating an effective futures market for dairy products.
The ICMSA's Pat McCormack urged processors to maintain prices or run the risk of production falling short of expectations as farmers opt to dry-off cows. He said the improvements on markets must translate into "price stability at farm level".
The new Kerry Group facility in Naas was officially launched by the Taoiseach Enda Kenny last Thursday. Over 90pc of the Group's business is now international and the centre will serve customers in Europe, the Middle East and Africa.
The centre employs 800 people and an additional 100 jobs will be created by the end of 2016.