Irish co-ops ‘do not have resources to expand in line with state targets’

IRISH co-ops do not have the money to expand the country’s milk processing capacity in line with the Government’s stated mid-term target of a 50% productivity increase, according to the Irish Co-operative Organisation Society Ltd (ICOS).

While the Government has ambitious plans to gear the country’s dairy production up to capitalise on predicted increased demand across the EU by 2020, the co-ops are pointing out that commodity milk processing has been loss-making over recent years, and the industry does not have sufficient capital to fund a dramatic expansion in capacity.

ICOS dairy policy executive TJ Flanagan said: “Quotas are going in 2015, so they will become less relevant as the projected 50% production increase gets nearer. If new plants have to be built, the question is who will pay for all that stainless steel? A 50% increase could mean an €800m cost. If a new factory has to be built on a green field site, that one-off capital cost could come to 30c per litre at current production levels.

“The industry doesn’t have that money, nor does the department. So how are you going to find it? Our suggestion is that dairy farmers will probably have to make a significant contribution to the cost, and our conference will discuss how that can be achieved.”

Mr Flanagan also said ICOS will be trying to ensure a higher dairy farmer participation in share-ownership in dairy co-ops. This link is more evident among overseas co-ops, and the dairy sector in Ireland is suffering by comparison.

Possible solutions to these issues will be addressed at the ICOS national conference on Thursday of next week at Citywest, Dublin. In the morning, speakers including Kevin Lane, chief executive of the Irish Dairy Board, Dr Onno Van Bekkum of Nyenrode University in the Netherlands, and retail expert James Burke will look at issues raised in the Food Harvest 2020 Report.

In the afternoon, Dr Van Bekkum will be joined by Jim Woulfe, Dairygold chief executive, Michael Dowling of AIB, and Sean Myers of ICOS to discuss the future relationship between co-ops and their supplier members.

Agriculture Minister Brendan Smith will address delegates in the evening.

Meanwhile, the Irish Examiner Farming Forum takes place during next Saturday’s National Dairy Show at Millstreet. It will address the topic of Dairy Expansion Inside and Outside the Farm Gate.

IFA president John Bryan will chair the forum. Speakers will be Vincent Buckley, chairman of the Irish Dairy Board and Dairygold Co-Op; Tom Clinton, a Co Meath farmer with experience of milk production in the US and New Zealand as well as Ireland, and milk producer John Murphy from Dripsey, Co Cork, who will speak on Challenges at Farm Level, making sure that members of the audience have their say in the subsequent debate.

The Irish Examiner Farming Forum starts at noon.