DAIRYGOLD MILK PRICE WARNINGS AS PROFITS PLUNGE
Local farmers, already suffering the affects of a declining market for dairy products worldwide, have been warned to expect a drop in milk prices as Dairygold’s annual results have revealed the co-op suffered a NETT loss in 2008.
“By the beginning of 2009 with dairy market returns plunging yet further against a background of a severe global economic downturn it had become clear that despite our aspirations for a strong milk price, it would no longer be possible to continue to support milk price to 2008 levels”, Dairygold chairman, Vincent Buckley said in a statement from the group this week.
Cork county councillor, Liam O’Doherty, a dairy farmer with Dairygold said that it was a ‘horrible time’ for the industry and added that farmers cannot be expected to produce milk below its cost.
“While conditions are the same for Glanbia and Kerry, it is disappointing that Dairygold were not prepared for it,” Cllr O’Doherty said.
“Despite all this talk of a recession people are still drinking milk and eating cheese. These so called ‘price wars’ with the likes of Tesco who are already selling milk below cost is crippling. This grocery act has been a huge blow to the farmer despite what the minister responsible, Micheal Martin, claimed. For the farmer it is disappointing that the milk is going for less than the cost of production.”
“A farmer who goes into town for a pint in the pub is paying for it with four gallons of milk at the moment,” he said of the current milk prices afforded to farmers.
The Dairygold statement revealed that the annual outcome was a retained net loss for the year of €3.2 million, down from a retained nett profit of €10.1 million for 2007.
The co-op announced an operating profit of €2.3 million for 2008, a year described as one of the most challenging on record for the society as global dairy markets suffered a steep downturn in prices while some costs, including energy, fertiliser and feed ingredients all rose sharply.
The nett loss comes when other charges including goodwill amortisation, taxation, share interest and associate results are taken into account. The share of associates’ performance before related taxation was a loss of €1.9 million in 2008 compared to a loss of €3.4 million in 2007.
The loss of €1.9 million is driven primarily by Dairygold’s share of the performance of Reox Holdings plc which generated a loss of €9.1 million on ordinary activities before taxation for the year ended 30 September 2008.
Cork East TD and Labour spokesman on Food and Agriculture Sean Sherlock said questions must be asked of Dairygold’s long-term dairy viability in light of the results.
“If there isn’t a global upturn in milk prices in the next 12 months the question for Dairygold is how it will remain viable and what permutations that will have on the milk processing arm of its operations,” Deputy Sherlock asked.
“What will happen to flagship projects, such as the one planned in Mallow? Will that now not get the go ahead? Will Reox explain to the public in light of the zoning what its job creation outlook will be over the next 12 months?” Mr Buckley, who said that Dairygold supported milk price ‘over and above’ 2008 market returns by approximately €20 million or 2.5c per litre, called for immediate Irish action to address the difficulties facing producers at a time of production constraint.
“It is neither fair nor tenable to expect farmers in any part of the EU to accept prices for milk which lower than those which prevailed twenty years ago. Irish family farming will be severely impacted if the present policies continue unabated”, he said.
“More must also be done at a structural level if the dairy sector is to remain viable into the future and offer a sustainable livelihood to future generations of Irish farmers”, Mr Buckley continued.
“Following the announcement of the elimination of EU milk quotas in 2015, the most important strategic objective must be to plan a coherent transition programme”.
“In the short term however, we need Government initiatives, operating within the EU, to deliver support measures such as full price intervention, increased export refunds and other temporary aids which would be of valuable assistance.
"However, these can only be short term in nature and we must look to longer-term solutions aimed at boosting consumption and rewarding efficient producers. For our own part, we will continue to develop our products, customers and markets and additionally work closely with the Irish Dairy Board in seeking out new markets and outlets for Irish dairy products,” Mr Buckley added.
Marcus Clifford of the Irish Creamery Milk Suppliers Association says the problem all goes back to the financial crisis.
“The traders themselves are having problems. They can’t get the credit at their banking system and it is down to that. Hopefully we have almost hit the bottom but there’s no doubt that prices will remain static with no hope of improvement in the short term. We have had a disastrous year weather-wise and price wise,” he said.
Thursday 7th May 6:28pm