Farm Ireland

Sunday 27 May 2018

Worst of the butter bubble may be over

There has been a global increase for dairy fats
There has been a global increase for dairy fats
Colm Kelpie

Colm Kelpie

The current price of butter is unsustainable but the worst may be behind us, LacPatrick boss Gabriel D'Arcy has said.

The price has soared following a global increase in the demand for dairy fats.

"Butter future prices are beginning to relax. I hope it doesn't collapse. I don't expect that it will, but it is not sustainable at current levels," warned Mr D'Arcy, who said the long-term average price of butter is about €3,500 per tonne.

"We're hearing reports that the retail price of butter has gone up in Germany, 15pc or 20pc, and consumption has reduced. What's happening is that people can't afford to buy butter and use butter as an ingredient and as a consumer at these prices."

But he said demand is now being curtailed.

Meanwhile, Mr D'Arcy revealed that LacPatrick had transferred production of its Monaghan Champion butter brand to Ballyrashane in Co Derry.

"We have done that to accommodate a significant increase in pack of butter production on the Monaghan site," he said.

He stressed that there was no threat to the Monaghan site, insisting: "Employment has gone up. We're investing this year about half a million (euro) on the Monaghan site."

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"There has been a significant increase in throughout on the Monaghan site, across all the different products that it produces. The Monaghan site would be a critical part of our fleet."

Mr D'Arcy was speaking on the margins of LacPatrick's unveiling of a 30,000sqft state-of-the-art Dairy Technology Centre.

He said the new £30m facility at its Artigarvan plant in Co Tyrone would allow LacPatrick to produce up to 12 tonnes per hour of dried dairy ingredients, up from five tonnes previously, and process 2.5m litres of milk per day on the site, up from 1m.

"It provides a platform for growth in terms of new products, new technologies and we're already beginning to see the benefits of that," he said.

Meanwhile, Glanbia Ingredients Ireland's CEO Jim Bergin said the high ingredient price for butter was putting "incredible pressure" on branded products in the marketplace.

"It will cause a burn-off at some point," he said, adding that it was likely to remain high until year end.

Concerns have been raised over Glanbia's new five-year fixed milk price scheme of 31c/l including VAT which is linked in to feed purchases from the group.

"The rank and file of our farmers are happy with the scheme and we believe it will be oversubscribed," said Mr Bergin after addressing the Agricultural Science Association conference on the future of agri-food.

He said ultimately farmers would be getting a "37c/l price for five years" as constituents were worth 3c/l and the feed bonus another 3c/l

Mr Bergin said he did not envisage any changes to it.

"The €30 will be a discount for feed on top of the commercial price so there is no risk for a farmer from that, it is only a plus," he said.

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