IDB chief puts a price tag to Irish milk output push

By Guy Montague-Jones

- Last updated on GMT

Related tags: Milk

The head of the Irish Dairy Board (IDB) has warned that expanding the Irish milk output by 50 per cent could cost the industry €850m.

Earlier in the summer the Irish government launched a policy document called Food Harvest 2020 in which it set out a goal of doubling milk output over the next 10 years.

The rationale behind the big milk push is that EU milk quotas are coming to an end in 2015, opening the market to the possibility of significant expansion for the first time in years.

But reservations have been expressed about the feasibility of the plan.

Reporting from the national conference of the Irish Cooperative Organisation Society last week in Dublin, The Irish Times quoted IDB chief executive Kevin Lane attempting to quantify what the milk target means for the industry.

Investment requirement

According to its report, Lane said the plan translates into an extra 2.7bn litres of milk for processing. To accommodate such an increase, he estimated that a €400m investment in processing capacity would be needed.

In addition, the dairy co-op chief said at least €250m would be needed in working capital, finance and additional facilities such as storage.

And then there is the question of where the demand is going to come from. Lane said that any expansion plan must consider future milk price trends and returns for farmers.

Production and marketing

He warned that production would have to shift significantly towards cheese and milk powder to make up for limited demand for butter. And then there is the question of where and how this extra product would be marketed.

Lane said finding ways to market for the additional product, supporting brands and the funding of acquisitions would demand at least €200m in investment.

Putting forward such figures, Lane said that his intention was not to scare but to instill some reality into the debate.

Discussing the industry expansion plan recently at the annual meeting of Food for Health Ireland (FHI) in Cork, Dairygold chief executive Jim Woulfe also warned that the 50 per cent target may be stretching it a bit. He envisaged 30-40 per cent as a more realistic figure.

The Dairygold head said the expansion plan would require “joined up thinking​” on the part of the Irish dairy companies. This could for example see the creation of shared facilities to meet the need for additional processing capacity.

Related topics: Markets, Pricing Pressures, Fresh Milk

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