Farm Ireland

Saturday 17 March 2018

'The last trough lasted 18 months - this one has been going for 27 months'

Dairygold CEO Jim Woulfe is optimistic about the processor’s prospects

Jim Woulfe, chief executive of Dairygold, farmer Martin O'Brien, Ballyclough, Mallow, host farmer and Professor Gerry Boyle, director, Teagasc on a farm as part of Dairygold's development programme.
Jim Woulfe, chief executive of Dairygold, farmer Martin O'Brien, Ballyclough, Mallow, host farmer and Professor Gerry Boyle, director, Teagasc on a farm as part of Dairygold's development programme.
Darragh McCullough

Darragh McCullough

"Last year was testing. This one's going to be really challenging," says Jim Woulfe with a wry smile.

The Dairygold CEO knows all about the reality at farm level, with the youngest of his four brothers still milking cows at home on the family farm near Ardagh in Limerick.

But the eldest of the Woulfes has come a long way since his days studying Dairy Science at UCC. Back then, in 1979, he took a job with Ballyclough co-op, which merged with Mitchelstown to form Dairygold in 1990.

He worked his way up from the factory floor to head of agri-business in 2002 and became CEO in 2009, after the co-op parted company with Jerry Henchy in controversial circumstances.

While some observers might have predicted the role to be somewhat of a poisoned chalice following the acrimony that surrounded Mr Henchy's departure, Woulfe appears to relished the role of leading an organisation that was heading into its first expansionary phase in decades.

A massive capital investment plan commenced that has seen €215m sunk into creating extra capacity at its main processing sites at Mitchelstown and Mallow.

The new CEO also had the wind at his back with milk prices rising to new highs for much of his first five years in charge. That all started to change in early 2014 when milk prices careered into one of the most prolonged slumps in recent memory.

"The last trough [in 2009] lasted for about 18 months. This one has been going on for 27 months," admitted Woulfe during press briefings on the co-op's annual results last week.

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And what does the Dairygold CEO think about the prospects of a turn-around?

"Global supply is still growing at 5pc, while global demand is growing at 3pc. And the latest data from the US, which shows that supply is up by 2.1pc in the first quarter is worrying. And we already know the positions that people are taking for quarter four [in 2016] so it will run into 2017 before we see a change. Cheap fodder and cheap grain aren't helping," he says.

But Woulfe refuses to remain downbeat.

"We're in a steady state from here on. The bubble that existed in 2014 was being worked through last year, and we're going to see a correction in the EU, especially when you see Friesland Campina dropping their price to 24c/l," he observes.

He is also excited about the commissioning phase that is on-going at the new driers on the Mallow site, which he is quietly confident about.

"It's been a good year for us, plant-wise, and this is an exciting phase at Mallow. Processing capacity will increase by 7.5m litres to 12.5m litres per week. But it's not just extra capacity because we've invested to infant milk formula spec, so this has the potential to add 10pc value to half of the milk that is processed there."

It's a big punt for the co-op, but Woulfe infers that the business had one chance to reach this level of spec because he believes it can't be achieved by retro-fitting.

While Dairygold suppliers will be pleased to hear that the project has been completed on budget and on time, they will be concerned about the fact that the average co-op price now being paid is struggling to meet a break-even level.

The base price for March has dropped to 23c/l, and top-ups for constituents have typically added another 3.5c/l on every litre throughout the year. However, spring milk tends to have lower constituents and the cold conditions are threatening to leave farmers under water during the key supply months of the year.

Despite this, only seven out of every 10 suppliers opted to go for the co-ops first fixed price scheme launched earlier this spring, with 30.2c/l on offer for 18 months of milk supplies from March 2016.

"We had hoped for a bigger uptake, but of the farmers that did opt in, they took up the full allocation of 15pc of their total. It was a new thing for us, and many may have equated it with the higher cost of fixing something like a mortgage. But it was a good start," he says.

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