IFA challenges dairy industry to deliver improved milk prices

THE dairy industry was challenged by the Irish Farmers Association yesterday to urgently restructure its operations and deliver improved milk prices to its suppliers.

It was launching a study it had commissioned from Prospectus, the consultancy company, which shows that savings of some €81.5 million can be achieved. The study claims tangible gains can be made through greater efficiencies, improvements in output value, greater co-operation, a better product mix and more marketing co-ordination.

It shows there is at least 2c/l per year to be made over the next two to six years from restructuring the industry. IFA president Padraig Walshe said dairy farmers cannot afford to wait around when such value can be realised. Decision time for the industry is now, he said.

The study was commissioned to demonstrate to dairy farmers the true monetary value of industry co-operation and consolidation, and to help move the current Milk Ireland discussions to the action stage before the year end. Mr Walshe said 2c/l is equivalent to around €81.5m over the national creamery milk pool. Paying two-thirds of this in improved milk prices to farmers would be worth €3,300 per annum to the average supplier. This would still allow about €27m per annum for the industry to service necessary investment to grow processing capacity as milk quotas are removed. Mr Walshe said this would guarantee productive re-investment at processing level which, within a more co-ordinated industry, has the prospect of further return increases.

He said Prospectus has shown a model which the industry can adopt very quickly, and without significant capital costs initially, as a first step towards greater integration, and which can deliver savings and value worth 2c/l within a short few years, and more.

IFA Dairy Committee chairman Richard Kennedy said the model developed by Prospectus for the IFA includes the Milk Ireland concept on which the current Irish Co-operative Organisation Society discussions are based.

But most importantly it puts the operational and marketing function at the very core of the system – with the Irish Dairy Board having a central part to play. “The Irish dairy industry is fragmented, made up of a multiplicity of processors, many of whom lack the efficiency necessary to compete.

“While there are some processing agreements between co-ops, they tend to be piece-meal, have limited scope, and it is unclear how much value they deliver to farmers,” he said. Mr Kennedy said as a result milk is not always processed with optimum efficiency, nor is it always directed towards the product mixes which can achieve best value.

“The Irish Dairy Board, sometimes used as a last resort, is under-utilised. Our inadequate structure is costing the entire sector, particularly farmers who are paying for all the inefficiencies and are missing out on the wasted opportunities,” he said.

Mr Kennedy said Prospectus confirmed that, while the current crisis is very severe for family farms, the medium to long term outlook for the sector is extremely positive.