Tough times ahead for dairy, say Dairy Board

THE Irish Dairy Board (IDB) has warned of worsening global market conditions for all categories of dairy produce lie ahead.

Dairy product prices have weakened considerably and are expected to have a serious impact on the board’s performance this year, it said.

The warning is bad news for dairy farmers who have been enjoying good returns in recent years as demand for dairy products internationally showed very strong growth.

The IDB’s chief executive Noel Coakley, said the first six months of 2008 has seen intense pressure on market returns as global demand declined from the previous year’s record levels, as the pace of growth in the global economy slows.

Coakley said people’s reaction to higher prices, coupled with more recent adverse economic conditions, have led to a slowdown in sales affecting many dairy players.

He said he expects the second part of the year will yield an improvement in the board’s financial performance, but warned that this won’t be enough to avoid a significant reduction in its operating surplus this year.

He pointed out that in Germany, one of the IDB’s biggest markets, recession fear is growing, a fact confirmed by Wednesdays EU Commission report which warned all of the 15 euro economies were facing recession by the end of 2008.

As a result the market has shrunk with a marked shift obvious in the retail butter market to own brand.

Coakley stressed however, that the Irish Dairy Board’s underlying performance was robust in spite of the current tough conditions and that the fundamentals of the dairy industry remain sound.

However he warned it will be 2009 before any substantial recovery in profitability is seen.