'Milk crisis set to deepen' says Dairygold boss
Dairygold boss Jim Woulfe warned that the milk price crisis may get worse before it gets better.
Mr Woulfe (pictured) said that co-ops like Dairygold will continue to underpin prices, offer extended credit to suppliers, as well as other vital supports given during the 27 month price crisis currently gripping the dairy sector.
The Limerick executive pointed out that the global market milk price is a lot lower than the 24c/l currently being paid by Irish co-ops and dairies.
But he warned that one of the key positives for Irish dairy exports - the strength of sterling - is now also beginning to weaken amid fears of a possible Brexit.
"There are a lot of challenges over the next couple of months," he said speaking at a Mallow Development Partnership event. "There is more uncertainty. We have to see a curtailment of supply. I do think this is a very long (price) cycle because it is running since about February 2014.
"The forecasters are saying we are getting some corrections in some geographic areas but it looks like the end of 2016 or even into 2017 before we get the dynamics needed to get more strength into the market."
The recent Rabobank dairy outlook also highlighted co-ops would need to continue to support prices or they would weaken further. It forecast an upward pressure on prices in 2017, with the latest Global Dairy Trade auction showing some optimism with a 2.1pc rise in dairy products.
Mr Woulfe said he also expected the EU to take further action to help struggling dairy farmers. "I believe more can be done," he said. "I believe the EU Commission need to deal with this on a month-by-month basis. We are not out of this yet. The 24c/l that is being mentioned is well, well above what the real market return is right now."
He said there had been good interest in their fixed price scheme, which allows farmers to fix up to 15pc of their 2015 supply.
He said they were also
extending credit to members. "We have supported milk prices in 2015 to a significant degree. The nature of a co-op is that you use your balance sheet in support of your members at times of crisis," he said.
"We will do everything in our power to do that. But, at the same time, we must have a business at the end of this process so we cannot be reckless in doing it."
"There are some corrections yet to come and that is regrettable. We are ever so conscious of the person milking the cow who owns the business," he said.
Despite the milk price crisis, supplies have continued to rise with Glanbia recording a 22pc rise in milk intake in the first 12 months without quota, Kerry and the west Cork co-ops were up over 11pc while Arrabawn has seen supplies up 25pc so far this year.
Dairygold saw its 3,000 milk producers deliver 18.6pc more in 2015, equivalent to 183 million litres. This year will see milk production expansion of 10.6pc.
A further 4.5pc expansion is predicted for 2017. "There are a lot of negatives out there and it is a global issue. That is first and foremost the issue - whether you are in New Zealand, Australia, the US, Asia or Europe, there is a major milk challenge there. What is out of kilter is that supply is ahead of demand right now."
He pointed out 30pc of Irish exports were destined for economies dependent on oil. "Their revenues and their ability to buy have been weakened significantly," he said.
"Then you have the whole situation of China and the recession. They have been such a big player in the period of 2011-2014 but they have eased off."
"We have had the geo-political events in the Ukraine, Crimea and then the Russian (dairy) ban. Coupled with all of that, we have strong grain markets and surplus grain. That is bringing about the ability to produce milk cheap particularly in the US. So there are a lot of dynamics at play."
He said the sterling had been a positive for Irish dairy farmers but it was now getting weaker and deteriorating.
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