Business Farming

Thursday 2 October 2014

Lane warns of 'massive volatility'

Declan O’Brien

Published 23/04/2014 | 02:30

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Kevin Lane, head of the Irish Dairy Board.

Milk prices are entering a period of "massive volatility" and dairy farmers need to be prepared for lower returns.

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The stark warning was delivered by the head of the Irish Dairy Board (IDB) Kevin Lane at a press briefing for the co-op's results for 2013.

"There is massive volatility on the way.

"We are in a period where prices have stopped increasing and are on a fairly significant downturn," the IDB boss said.

"If I was a farmer today, I would be very concerned about volatility as I look out the next five years," he added.

Mr Lane said it would be "irresponsible" of IDB management to say to farmers that "they had nothing to worry about".

He urged dairy farmers to plan for greater peaks and troughs in milk price so that they have a buffer to rely on in years where prices are low.

"I would be trying to make sure that, in a year when I'm getting an excellent return, in long-term standards, 36-39c/l ... that I was putting some of the return to one side for years when I was absolutely, certainly getting paid in the late 20s or early 30s."

Irish Dairy Board chairman Aaron Forde said price volatility had struck a year before it was expected to hit.

Forde said that the indications were that milk price would be back 8-10pc this year, but he said the long-term outlook was positive, with demand growth still outstripping supply growth.

At the IDB press briefing, Mr Lane also admitted that existing Irish dairy produce would have a "zero chance of success" in the massive Chinese market.

He said Irish dairy produce would have to be "tailored" to local tastes if Ireland wanted to significantly expand exports to the region.

"I just came back from there (China) 10 days ago and I will tell you what the Chinese consumer is looking for is not the dairy products that are manufactured in Ireland today," Mr Lane insisted.

Opportunity

He said there was a good opportunity for milk powders, "provided they are done to the right standard".

Local tastes also provided opportunities for "dairy-based beverages" and "spreadable cheeses", Mr Lane added.

He said traditional Irish produce such as Kerrygold butter would be limited to niche markets.

Mr Lane pointed out that 25 young sales executives had "packed their bags" over the last year and were examining market opportunities not only in China but in Russia, the Middle East and Africa.

Describing China as a "significant medium-term term opportunity", he said the IDB would look at matching Irish produce to the taste requirements of the Chinese market and that this policy could possibly involve the board in joint ventures with local processors.

Mr Lane said IDB had also commenced a search in China for "possible acquisitions".

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