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KPMG report gets a muted response

The much-anticipated KPMG report on the dairy processing sector generated a muted response when it was finally unveiled to the country's dairy chiefs in Portlaoise, Co Laois, last Wednesday.

CEOs and chairmen from 13 dairy co-ops had assembled to hear the six recommendations to emerge from the €450,000 study that took more than six months to complete.

The key suggestion was that the milk pricing system needs to be revamped to give processors an improved margin to re-invest in processing facilities and research and development.

"Ireland's seasonally driven product mix is not delivering as favourable a return per litre to the processor when compared with our international competitors," stated an ICOS press release after the meeting.


The dairy bosses were told that the current pricing system was "driving short-term behaviour".

The report recommended switching from the negotiated milk price system to one based on international markets, similar to those used by Fonterra and Friesland Campina.

The authors of the report also recommended that co-ops extend their collaborative efforts to enhance the product mix and assist funding of any such developments.

The co-ops were also told that they needed to alter their funding strategies to work more towards medium to long-term goals and that their long-term marketing plans needed to tie in with the goals of the Food Harvest 2020 report.

KPMG envisages a greater role for the IDB and benchmarking to achieve these targets.

The half-day presentation received an "underwhelmed" and "muted" response according to a number of the co-op representatives who attended.

"What else do they think we've been trying to do all these years?" was the incredulous reaction from one delegate.

Commenting on the report, ICOS president Pat McLoughlin said that the extent of collaboration that has taken place within the industry to co-operate with the study was encouraging.

"On this basis, we can reasonably look forward to further significant progress," he said.

While the study found that Irish milk processing costs compare favourably with international peers, some costs such as the energy per tonne of product and plant utilisation and optimisation merited further attention.

ICOS CEO Tom O'Callaghan called for further progress on the back of the report over the coming months.

"The analysis conducted by KPMG has been invaluable in that it has laid out the facts in relation to the actual position of the Irish dairy industry in its global context," he said.

"The work to-date highlights the tangible efforts and achievements made, while demonstrating that there is no room for complacency.

"With considerable expansion on the cards, the industry can be well positioned to match the ambitions of Irish dairy farmers in the years to come."

Indo Farming