Farm Ireland

Thursday 22 March 2018

IDB boss puts €850m cost on 2020 milk plan

Kevin Lane warns co-op boards on need for complete accountability in any proposed overhaul of dairy industry

Declan O'Brien

Declan O'Brien

The cost of expanding Irish milk output by 50pc over the next decade will be €850m, and will pose serious challenges for the entire sector, board members from the country's main co-ops have been warned.

Irish Dairy Board (IDB) chief executive Kevin Lane said the full cost of the proposed expansion, which is set out in the Food Harvest 2020 report, needed to be addressed.

Mr Lane also told delegates to the ICOS national conference, which was held in CityWest, Dublin, that moves towards dairy expansion should only be considered following a detailed analysis of likely future trends in milk price and returns to dairy farmers.

The IDB boss said growing milk production by 50pc would require a €400m investment in additional processing capacity.

In addition, he predicted that at least €250m would be needed in working capital, finance and the provision of facilities such as storage.

Moreover, developing routes to markets, supporting brands and the funding of acquisitions would cost a further €200m at least.

Mr Lane pointed out that the expansion proposal would necessitate the processing of a further 2.7bn litres of milk.

He said the limited demand for butter meant that annual cheese production would have to double to more than 300,000t, while whole milk powder (WMP) production would have to increase four-fold to 100,000t.

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"And where are we going to market that?" Mr Lane asked.

The IDB boss said he was not attempting to deliver frightening figures, but that he was merely seeking to instil some reality into the debate, he maintained.

He said a road map setting out the required actions and timelines to evolve the correct 'end-to-end' strategy for expansion was required.

Mr Lane said names and dates had to be attached to every goal so that there was accountability in the delivery of any agreed plan.

He identified the seasonality of Ireland's milk production as both an asset and an impediment to growing milk output.

In terms of milk price, Mr Lane quoted studies by Dutch lenders Rabobank which forecast prices averaging 25-26c/l over the next few years.

However, he said there was still potential for price volatility and he insisted that a sound analysis of future trends in milk pricing would be required to convince farmers of the merits of expansion.

"Is the average return for milk going to 30c/l, 25c/l or 22c/l? We shouldn't be asking people to invest until we know that," Mr Lane said.

Speaking in the afternoon session at the conference, Dairygold chief executive Jim Woulfe said a survey of 8pc of suppliers had confirmed that the co-op's milk pool was likely to increase by between 30pc and 40pc following the abolition of quotas in 2015.

John O'Brien of Carbery Milk Products in west Cork said supply growth of around 25pc was expected in their area.

A lift in supplies was also expected by Town of Monaghan, the co-op's chief executive, Vincent Gilhawley, told the conference.

Irish Independent

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