The EU is to abolish milk quotas in April, 2015. Dairy farmers across the country are eyeing expansion, which hasn’t been possible for the last 30 years. With increases in milk volumes expected at the creameries, the processors have planned how they will manage the extra volumes.
The country’s second-largest dairy processor, Dairygold, has announced the first phase of its expansion programme with a €33m investment in new facilities at its Mitchelstown plant, in North Cork. We asked Dairygold chief executive, Jim Woulfe, about the significance of this investment.
>>“Last week, Dairygold announced a €33m investment to expand and upgrade our milk-processing facilities at the Castlefarm site, in Mitchelstown. It represents phase one of our processing-expansion programme designed to meet the needs of the projected increase in our members’ post-quota milk-supply volumes. The investment involves the construction of new milk-intake bays, a new dairy plant for pasteurisation and separation, new evaporation system, a new six-tonne-per-hour multi-purpose milk dryer and a new bag-off operation. It will increase Dairygold’s overall peak processing capacity and will be commissioned in time for next year’s peak milk season. It has been supported by the Department of Jobs, Enterprise and Innovation through Enterprise Ireland. This is more than processing expansion. It also improves the energy-saving and environmental performance of our Castlefarm operation. The technology being installed will reduce energy consumption and emissions, through heat recovery and water-reduction measures, and builds on the construction of the anerobic-digester effluent plant, which we commissioned on-site in 2012.”
>>“In planning Dairygold’s response to operating in a dairy sector without quotas, we asked our members to determine their expansion ambitions. This process indicated a society-wide ambition to increase milk production by 55% to 60% between 2011 and 2020. As a co-operative, Dairygold has committed to accept all the milk that its members can produce. However, we can only do that efficiently if we have some indication of how much extra milk our members intend to supply each year, as the 2020 forecast will happen gradually over the next seven years. So, we are asking all our members to forecast, each year, their milk volumes for the following two years. For example, in January and February next year our members will forecast their 2015 and 2016 milk-supply volumes.
“With the benefit of annual forecasting, we can invest in additional processing capacity on a modular basis, meaning it will be built up in stages based on forecasted milk volumes. In this way, we will not come up short of having adequate processing capacity in place, and neither will we waste money on unnecessary investment. The phase-one investment in Castlefarm will give us the initial expansion in processing capacity through next year’s peak and into 2015. We will constantly review our members’ milk forecasts to determine the extent of ongoing investment needed.
>>“Phase two of our expansion programme earmarks our existing site in Mallow for redevelopment. We plan to establish new state-of-the-art milk-drying facilities at the site to produce the full range of milk powders, up to and including infant-milk formula. Planning permission for construction was protracted, but was achieved in May of this year. Again, our emphasis for phase two is on modular expansion, aligned with forecast milk-volume growth. The Mallow plan adheres to that modular approach by separating the proposed investment into stages, with the initial installation of a 7½-tonne-per-hour dryer and associated infrastructure in 2015. We will constantly refer to the member forecasts to determine the timing and extent of investment needed.”
>>“The end of milk quota restrictions, in March 2015, is to be very much welcomed, as it offers Irish dairy farmers the first opportunity in 30 years to increase milk production without fear of super-levy. After 2015, dairy farmers no longer have to operate within the constraints of quota and are free to expand their farming enterprises, if they so wish. Dairygold milk suppliers operate in one of Ireland’s most fertile milk-producing regions and, consequently, are displaying strong ambition to expand. Milk supplies to Dairygold, since the beginning of June of this year, have been running ahead of 2012 supplies, on average by more than 8.5% per week. While good weather has obviously been a contributing factor, this growth pattern is a good indicator of the potential for expansion from our milk suppliers.
>>“More than 85% of Irish dairy produce is exported. Domestic consumption only makes up a small portion of our overall output. Therefore, all the extra dairy produce from Ireland that might materialise post-quota will be exported. All the signs for continued growth in global demand for dairy product are positive. Industry analysts predict a compound growth rate of 2.5% per annum, with milk supply growing by circa 2.2%. Ireland produces only a small volume of the overall global supply of dairy products, but we supply a large volume of the internationally traded volumes, so we are in a good position to take advantage of the opportunity that post-quota expansion offers.”
>>“With 17 months left before April 2015, Dairygold’s processing expansion programme is on schedule and we welcome the unlocking of the constraints that the quota system has placed us under. The journey won’t be without turbulence; price volatility will be a more regular feature of the unregulated environment in which we’ll have to operate. We must expand with caution and manage our investment prudently and with a focus on international markets and the interests of our members. Overall, the future for the Irish dairy industry looks bright, as we have the potential to promote quality-assured dairy products for a growing global population.”