British exit could create new opportunities for dairy sector

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THE British move to exit the EU may create trade opportunities for the dairy sector, writes Darragh McCullough.

"If the euro remains weak compared to the US dollar, it will make dairy exports from the EU extremely competitive all over the world," said INTL FCStone commodity risk analyst Charlie Hyland.

"Dairy products are traded in dollars all over the world, and products from the EU are already very competitive, but a weakening of the euro compared to the dollar would give sellers scope for further growth."

However, dairy processors are taking a more cautious view. "It's going to be business as usual for us for the next two years. At the moment the focus is all about the sterling to euro rate," said Lakeland Dairies CEO Michael Hanley

"We'd prefer if we weren't dealing with this, but it's there and we're used to dealing with currency fluctuations. Longer term, I'm concerned about who's going to be able to lead negotiations for the UK now that David Cameron has thrown in the towel. Both the Conservatives and Labour are in chaos, and we need someone that can negotiate a good deal with the EU."


Strathroy Dairy director Ruairi Cunningham said that the Leave vote was only the start of negotiations between Britain and the EU. His company buys close to 80 million litres of milk annually in the South for processing in their plant at Omagh in Tyrone.

"We've already seen Nigel Farage row back on what will be available for the NHS and on Britain's ability to control immigration when it is outside the EU, so the public might realise that they were sold a pup," he said. "So this could end up like the Lisbon Treaty yet, where the government keep going back to the people until they get the answer they want."

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He added that Strathroy were not concerned about the immediate impact, even though they bought more milk in the South than they had markets for there.

"What we'll lose there, we could make up with the weakening of sterling in terms of our exports, so we're fairly well hedged. In fact the uncertainty will probably generate opportunities too. But at the moment, we're in the dark like everyone else," he said.

Glanbia pointed out the UK was not a major market for it, accounting for 3pc of revenues in the whole business.

Glanbia purchases milk from Northern Ireland through joint ventures with Glanbia Ingredients Ireland (GII) and Glanbia Cheese. These joint ventures also trade in the UK.

"The outcome of the referendum will have no immediate impact on these relationships," a spokesman said.

Kerry Group pointed out its network of factories in the UK which were producing for niche markets and a growing population. It stated the overall impact would be "low" but some Irish operations would be impacted by currency fluctuations.

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