Dairy board chief points to impact of biofuels
That’s the view of the Irish Dairy Board, a commercial co-operative which sells Irish dairy products on behalf of its processor members in 93 markets worldwide. It had a turnover of over €2 billion in 2006.
Board chairman Michael Cronin said the boom in dairy product prices last year caught everybody by surprise. The reason it happened was that supply failed to meet demand.
“Going into 2008, it is still extremely difficult to predict the future of milk price for the year ahead. It’s really all about supply and demand on world markets.
“The reality is that the commodity dairy markets are presently very weak and there is a correction from the massive spike in world market prices of last year.
“When markets settle, it is expected that they will do at level higher than the prices in place before the boom last year,” he said.
Mr Cronin said biofuels will have a fundamental impact on milk production. The emergence of the biofuel issue should be favourable to grass based production.
“I believe that the overall impact of this is not yet fully clear as yet. More clarity will emerge in the next few years as the world begins to deal with the impact of environmental issues,” he said.
Mr Cronin, who is chief executive of the progressive Newmarket Co-op in Co Cork, said EU exports slowed dramatically towards the end of 2007.
It is now very clear that the supply and demand for dairy products are reacting to the price peaks of 2007. Price volatility is expected to be a feature of dairy trading with the EU and world prices converging.
The board chairman said climate change or unusual weather patterns in Australia, Europe, Asia and South America have had a huge impact on the supply side.
He said much of the buying in dairy markets was driven by strong global economic prosperity. The world economy grew by 5.4% in 2006.
In relation to milk quotas, Mr Cronin said the expected increase for 2008-2009, which has yet to be passed by the European Parliament, may not be fully taken up in Europe. “I would expect that Ireland could fill this without any difficulty. It is well placed to deal with a relaxation of quotas with many other countries in the EU, such as Britain and France, not taking up its current allocation.”
Mr Cronin said the emerging view is that quotas will not continue beyond 2015. Milk producers should be given certainty through the CAP “Health Check” to plan for the future.
He said his vision for the Irish Dairy Board is it should remain as an independent entity.
“In my view it has done an excellent job since its foundation and the stronger it is in the market place, the stronger price it can pay back to its members and ultimately Irish milk producers.”
Dealing with the industry structure in Ireland, he said irrespective of what configuration takes place, milk will have to be processed in the most efficient manner.
“We are different to the rest of Europe in that our supply is highly seasonal. It means for a long period during the summer every ounce of available processing capacity is called on.
“But the flip side is that at the shoulders there are significant opportunities to optimise processing capacity,” he said.
Mr Cronin said co-operation, joint processing arrangements and other links have been the hallmarks of the processing industry in recent years. He expects more of these to take place. “In my view there is a place for both small and bigger players in the industry. Smaller plants have the opportunity to develop into niche product areas while it is a reality that plants producing commodity products must be scale efficient.
He said Ireland’s competitors — processors, food ingredient customers and retailers — are consolidating.
“We have, however, a unique structure in Ireland, where almost all processors are members of the Irish Dairy Board. We, therefore, have the potential to act with one voice in the market place,” he said.
CONNECT WITH US TODAY
Be the first to know the latest news and updates
