Dairygold chief says Ireland needs to focus on growing markets
As an exporting country, Ireland has to be prepared for risks such as Brexit and global trade wars, according to Dairygold CEO Jim Woulfe.
"We're an exporting nation, we have to follow the money. We have to follow the markets that are growing and giving the return, and there is always risk with that, such as Trump, Brexit and other trade agreements. They are always going to iron themselves out at the end of the day.
"We can't react or jump to every whim, to every utterance or tweet by Trump. We have to be conscious of the trends that are evolving. We're conscious of the shenanigans that are there but they don't influence our day to day."
Brexit, he said, if it comes to a cliff-edge hard exit with WTO tariffs being imposed by the UK, could cost the dairy processor €50m, while the indicative tariffs proposed by the UK would cost the processor around €9m.
And for Mr Woulfe and the Dairygold team, the main challenge facing them is how to recover such costs.
"The natural place to try and get it back is the marketplace, but the UK market is unforgiving and the UK retail scene is really challenging. There is going to be a lot of pushback, if you're going to try to get a cost increase in the price of cheese.
"We don't have wiggle room to take on that kind of cost.
"Obviously the other area is the producer side. From a farmer point of view, it's a very serious position if we're in the hard, cliff-edge non-negotiatble WTO scene - even the €9m scenario, that's quite an exposure in the form of three-quarters a cent per litre."
Dairygold sends 30,000t of its cheese to the UK market and currently has six months' of cheddar cheese stockpiled in the UK in the event of a hard Bexit.
"We have done what we can do in the context of cheese stocks, working closely with our customers and making sure that our business is least impacted by any type of Brexit."
Dairygold is forecasting that its milk supply will almost double to what it was in 2009, over the next four years.
According to its annual report, suppliers are projecting to increase milk production by an additional 23pc to 1,650 million litres by 2023, which will require the society
to increase its peak processing capacity by around 8 million litres per week.
However, future consideration for the next phase of primary processing investment has to be the funding model and who finances it, the society and/or the members, according to Woulfe.
"Our post-quota plans of 2012 had three pillars of investment to fund the model, including the bank and members.
"That was great when 80pc and more of our members were in expansion mode. Now, the numbers of expanders are becoming less and we have to discuss it with elected representatives.
"We are not going to tell our members what to do. We can
work in whichever way, but the litre of milk is going to pay in some shape or fashion.
"We have to have the discussion with the new entrant and expander, do they have to fund some more.
"I don't want to lead the debate in any direction.
"We're only putting it out there that the discussion has to happen."
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