Dairy sector needs action to strengthen the industry, say leaders

IRISH co-op leaders have been warned of dire consequences for farmers and the dairy processing sector if decisive action is not taken to consolidate and strengthen the industry.

It followed another meeting of dairy co-op chairmen and vice chairmen under the auspices of the Irish Co-operative Organisation Society (ICOS).

ICOS president Pat McLoughlin said the current farmer milk price is being subsidised by co-ops by up to 6c per litre.

“Therefore, the real price of milk, based on current butter and skim milk powder markets is of the order of 18 — 20c per litre,” he said.

Mr McLoughlin said the current market conditions are disastrous for processors and farmers, and no significant upturn is predicted before the second half of 2009.

“While we have no influence over global market conditions or the wider economic crisis, we do have control over our own operations.

“We must act decisively to improve efficiency, provide for product development, and move up the value chain.

“We have to address our current commodity exposure. This can be achieved by bringing the processing industry together into a centrally co-ordinated business, which would manage the milk pool.

“It would also co-ordinate production into the plants and products with the greatest return, provide for product development, plan for expansion and reinvestment, and link all the functions more closely with the market,” he said.

The European Commission has meanwhile approved the planned merger of Dutch dairy co-ops Friesland Foods and Campina to create a global dairy group, after they promised to sell some businesses to avoid antitrust problems.

Based on 2007 figures, FrieslandCampina’s combined annual revenue amounts to €9.1 billion. It has 17,000 dairy farmer members in Belgium, Germany and Holland.

Cogeca representing European agri-co-ops, said: “As a result of this co-operative merger, farmers will improve their long term competitive position in the global market.

“European consumers will benefit from the improved ability of the new dairy to invest in research and innovation activities in the food chain.

“This will result in new innovative product lines of quality products and so serving the needs of consumers,” it said.