The European dairy industry is currently gearing up for the abolition of EU milk quotas in April 2015. Dairy co-operatives plan to produce greater quantities when barriers on output are raised, and many are preparing for plant expansions.
But manufacturers like Silver Pail will be affected differently by the end of the milk quotas.
Silver Pail’s MD said her main concern was not expansion, but changing costs of raw materials. With the raising of EU quotas, “dairy prices should be more stable, and a lower price will work in our favor,” said Thea Murphy.
“At the moment, dairy prices are particularly high. That’s something which doesn’t help us in our business, because we have to buy our dairy products. So passing those price increases on to our customers is not an easy task. We look forward to the day when dairy prices are reduced slightly.”
However, market behaviour could be unpredictable, she said. “Whether that happens or not is a whole other matter. Dairy prices staying so high for so long this year was quite unexpected. Nobody seemed to have forecasted that.”
Around March and April last year, people predicted that with a good summer, prices should stabilise and go the other way, but they haven’t.
Another challenge, she said, would be the response from shrewd consumers if milk prices are lowered. “Customers think that way too; they know exactly what’s going on in the market,” she said, and they will expect cost savings to be passed on.
Ultimately, “it’s too early to tell whether we will lower prices of the consumer goods,” said Murphy.