Intervention casting a 'shadow' on dairy warns Lakelands boss
Lakeland Dairies co-op boss has warned that a "big shadow" continues to hang over dairy sector prices due to intervention stockpiles of skimmed milk powder.
The northwest-based dairy chief executive Michael Hanley warned supply and demand remained closely matched after a volatile year for the sector.
"There is a big risk, a big shadow from the intervention stocks of skim. There are 350-370,000t of skim which is casting a shadow across the skim market. It is having an impact on the whole dairy portfolio," said Mr Hanley which supplies 240 products to 80 countries worldwide.
"It takes very little extra supply to flood the market.
"Providing there is reasonably constraint in supply you'll see some stability in prices for 2017. That is providing Brussels handles the stock of intervention skim shrewdly."
The ICMSA's Ger Quain said he felt there was still a "workable balance" with reduced SMP going into intervention.
Lakeland supported milk prices by 1.5c/l last year as their 2016 results showed operating profit had halved to €7.2m, while revenues recorded a slight rise to €601m.
Mr Hanley described Brexit as a "tremendous challenge" for the sector. Yet he stressed they were well-positioned for the impending Brexit after they struck a deal last year to buy Northern Ireland-based Fane Valley ahead of the UK's decision to depart the EU.
Mr Hanley said they had a "safety net" in the case of a hard Brexit as they could separate their milk pool for processing north and south of the border with their new facilities in Co Down.
"With inward processing we believe that providing that the red tape isn't too cumbersome we can operate through this," he said.
"If commonsense prevails and there is a will there, which we expect there will be, then this process from a Lakelands perspective should be as seamless as possible."
Currently, Lakelands lorries make over 25,000 trips across the border each year. He said they did not want to return to "customs post issues".
"There's no reason why commonsense can't prevail, we've moved milk and product across the border through all types of adverse political and weather conditions over the years," he said.
After their milk pool surged 22pc last year to 1.1 billion litres with the Northern Ireland purchase and growth in suppliers, Mr Hanley forecast the milk volume would continue to grow by 4pc a year.
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