DAIRY markets are set to improve this year but the pace of recovery is likely to be gradual, Lakelands CEO Michael Hanley has predicted.
Mr Hanley pointed out that since September, world butter and milk powder prices have increased, spurred on by rising demand in Asia and the Middle East.
Prices have also been helped by concerns of declining milk output from the EU, USA, Australia and New Zealand.
"If the global recovery persists, prices may reasonably be expected to improve well above 2009 levels," Mr Hanley said.
"Given the historically low price levels that have been reached and the slow antici-pated pace of recovery, these improvements will be gradual. It is also the case that significant milk price swings could still take place from peak to trough in the years ahead," Mr Hanley added.
He identified the continued weakness of sterling and the dollar against the euro as serious impediments to dairy sector recovery as it had made Irish dairy products significantly less attractive outside the Eurozone.
"During this year, it is to be hoped that the euro will weaken, thereby allowing us to regain some of our lost competitiveness and to improve our export potential," he said.
Mr Hanley also said it was vital that market supports, including export refunds and intervention storage, which were introduced by the EU Commission last year, are maintained throughout this year.
With 83,000t of butter and 283,000t of skim milk powder now held in store, Mr Hanley warned that the release of these stocks back onto the market would have to be managed carefully if prices were not to be negatively affected.
He confirmed that the co-op's new €20m milk drying facility at Bailieborough, Co Cavan, will be operational this spring and is to produce 70,000t of quality milk powders annually, with 25,000t of butter products also being produced there.
"Bailieborough will be the most modern plant in Ireland and Europe for non-whey milk powders. We will close the Lough Egish facility to yield further cost reductions and efficiencies," Mr Hanley said.