Small dairy co-op dynamism is good for all

RESULTS from the better- known diary co-ops in the northeast and northwest over the past week show the sector is in better fettle than it has been for some time.

Just yesterday, Connacht Gold announced a major boost to profits for 2007 while Lakeland last week produced a massive turn-around in its fortunes, going from an operating loss in 2006 of €7.2m to a profit of €5.5m last year.

Donegal Creameries, one of the other key co-ops in that part of the world, delivered a 66% rise in its 2007 operating performance.

All three have milk divisions in common, with property and other investments also a common link

Of greater significance is the fact that going back a few years the future for all of these co-ops was looking pretty bleak.

Then, Celtic Tiger Ireland exploded on to the scene and suddenly property that was lying dormant and land banks that at one point looked pretty worthless turned into real assets which most of the dairy co-ops, including Dairygold, have become adept at exploiting for their market potential.

How much that side of the business will continue to deliver in the long term remains to be seen and indeed the slowdown in property at the minute is hardly a good omen for anyone.

Nonetheless the new dynamism to be found in the smaller dairy co-ops is a welcome development for a number of reasons.

It means those in remote parts of the country look like they have a better chance of staying on the land as stronger demand for the range of dairy produce that Irish farmers can produce continues to grow.

The reasons have been well-rehearsed. Rising living standards, particularly in China and India, are turning people onto the delights of what daisy the cow can produce to excite out palates.

That rising demand for the whole gamut of dairy produce has taken the world by surprise.

Consumption of dairy produce has always been synonymous with good living standards and that is what we see happening with demand for dairy goods now — rising by over 2% a year against an increased output that is closer to 1%.

When you add to that phenomenon the growing international need for long- life dairy products, the array of possibilities becomes even more attractive.

These long-life offerings such as milk are the type of products that make international air travel and all sorts of exotic holidays possible.

All of this is being driven by changing lifestyles and rising living standards which are creating new opportunities for part of the Irish dairy sector.

Such expanding demand has offered Lakeland and others a new range of openings to be exploited as the world dairy markets continue to evolve.

As consumers continue to demand health benefits from their food, opportunities also exist for the development of whey into products or ingredients for new foods.

This explosion of demand on the one hand, and the shift in emphasis by consumers to health and wellness products on the other, is making the prospects for the Irish dairy farmers so much better — a fact reflected in the very good crop of results produced by the above mentioned co-ops in the past week.

This change is contrary to what most experts thought possible as the EU moved agriculture closer to free markets, abandoning export refunds and other price support mechanisms as we edged closer to free markets internationally.

The general view was that only the biggest farmers would survive and the flight from the land would continue inexorably.

That still is so, but it is becoming increasingly likely that the number who live to fight another day as dairy farmers could be a lot bigger than previously forecast.

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