Dairy farmers to get €825m boost

Dairy farmers will collectively receive an extra €825m per annum in their creamery cheques by 2020, according to experts.

TJ Flanagan, a policy adviser with co-op umbrella group ICOS, said the 2.5 billion additional litres of milk expected to be produced annually by Irish dairy farmers would be worth €825m at the current average price of 33c per litre co-ops pay farmers.

He said: “That €825m is just the value to the farmers of the extra milk. With sales of butter, powders and skimmed milk products, the extra post-quota milk could be worth at least €1bn to the Irish economy.”

His comments follow the recent prediction by Dairygold chief executive Jim Woulfe that the Cork co-op will pay an extra €160m annually to its members by 2020. As Dairygold processes 15% of Irish milk, this suggests up to €1bn extra in the national milk cheque.

However, based in the milk stronghold of Cork, Dairygold is more confident than others of hitting the 50% output increase citedin Food Harvest 2020.

Mr Woulfe said: “Our initial findings indicate an increase in excess of 50% in milk production by Dairygold suppliers up to 2020, comprising of a 22% increase in the years 2014/2015 followed by a projected growth of around 5% in each of the five following years to 2020.

“Most importantly, milk expansion will provide Dairygold milk suppliers with additional income.

“At current milk prices Dairygold potentially will be paying an additional €160m annually to farmers by 2020. This income will have a significant knock-on multiplier effect on the wider economy, especially in Munster.”

Speaking at ASA/ACA’s conference in Co Tipperary, Mr Woulfe also revealed Dairygold’s financing plans, with an international bank for €130m in extra milk processing facilities at its sites in Mallow, Mitchelstown and Mogeely.

If the plan goes ahead, only a portion will come from the bank in a 12-year deal. The farmers’ input in the deal will be repaid via a 1.5c per litre levy from members’ milk cheques under a seven-year revolving loan deal.

Mr Woulfe said Dairygold’s board will take eight weeks to make a decision on this investment. The country’s largest co-op, it may yet opt to collaborate with other dairy processors.

ICOS estimated €400m would cover the extra machinery required for Irish creameries to equip themselves to process 50% extra milk output by 2020. Some debate focused on the possibility of centralising milk processing in two or more ‘super co-ops’.

One UCC study in 2006 analysed transport costs, 35% of which are incurred by tankers en route from farm to creamery. The report looked at a model with centralised production in larger creameries at peak times, with smaller co-ops also taking in milk outside the peak.

Mr Woulfe said: “Our priority over the last year of intensive analysis has been to identify the most efficient and post-quota processing strategy. We continue to investigate a variety of possibilities in that regard, including standalone and co-operative efforts.”