Dairy farmers commit to expansion, but no need for a ‘super co-op’ yet

Dairy farmers are committed to expansion but the industry has no pressing need for a centralised super co-op to process the extra milk, Dairygold chief executive Jim Woulfe argues.

With Ireland set to produce 50% more milk after 2015, dairy co-ops have, for now, opted to upgrade their existing facilities.

Cavan-based Lakeland Dairies has also mapped out its plans in its latest annual report.

Mr Woulfe said: “Where should the industry go from here? Ireland will have a big pot of milk. We can all see what the bigger picture should be. In the long term, collaboration is probably the most realistic option.

“We see further collaboration in milk processing as being realistic to maximise efficiency and avoid untimely capital spend. That said, joint ventures can be complicated, and come with a lot of governance issues.”

Mr Woulfe added the availability of a cost-effective Dairygold solution — by expanding its Mitchelstown, Mallow and Mogeely facilities — places the co-op in the fortunate position of having a benchmark against which all other options and solutions can be measured.

Dairygold already collaborates with Glanbia on butter processing. To control costs, it also closes some of its winter operations and transfers the work to Arrabawn and Glanbia. The larger co-ops have met to discuss the sharing of processing costs, but have so far bypassed the super co-op option, which industry sources estimate would cost at least €400m to develop.

Mr Woulfe said: “Over the last year we have investigated a range of possibilities, including standalone and collaborative opportunities. Dairygold has well-invested processing sites in Mitchelstown, Mallow and Mogeely, with scope for expansion.

“Sweating these existing assets makes absolute sense for Dairygold as they offer established utilities infrastructure — power, natural gas, effluent plants, water — with the potential to reduce the capital investment requirement in expanding our future processing capacity.

“The society has planning in place for expansion of the Mitchelstown Castlefarm site, and work is advanced in preparing a planning application to expand the Mallow milk processing site,” said Mr Woulfe.