Industry being rocked by a ‘perfect storm’

Dairy UK’s Trevor Lockhart told members of the Stormont Agriculture Committee, sitting in emergency session earlier this week, that Northern Ireland’s milk processing sector is operating at a significant loss at the present time.

“All of the processors, most of which are farmer-owned co-ops, are endeavouring to pay farmers the best possible price at the moment in time,” he said.

“And we know that it is not enough in terms of delivering a sustainable price to producers. But the reality is that if market conditions persist, it’s not beyond the realms of imagination that processors may start going to the wall over the coming months.”

Lockhart, who is also chief executive of the Fane Valley co-op, confirmed that dairy products may start to be intervened here in Northern Ireland over the coming days.

“There is no sign of international dairy markets improving over the coming months,” he said.

“In fact, they may well weaken further before starting to turn in the other direction. And this will have an impact on future farm gate milk prices.”

Lockhart confirmed that the only measure that can be taken to alleviate the financial pressure on the dairy sector is for Brussels to increase intervention prices.

“We must, as an entire industry, persuade Farm Commissioner Phil Hogan of this reality,” he said.

“Financing enhanced intervention support is not the issue at hand. Back in 2009, the last time that the EU Commission introduced a realistic intervention support scheme, Brussels made over €1bn in profit when the product was released back on to the commercial market.

“The issue is one of mind-set, both at the level of Phil Hogan and his team of advisors. If the Commissioner agreed to consider an increase in intervention prices, the impact this would have on market sentiment across the entire dairy sector would be very positive.”

Looking to the future Lockhart said the local dairy industry must be re-structured in ways that prevent farmers from taking all of the pressure when volatility impacts in a negative sense on world dairy markets.

The Ulster Farmers’ Union also gave evidence to the agriculture committee this week. Deputy president Barclay Bell said that the UFU had been campaigning for over 12 months to secure increased support for the milk industry.

“We are also mindful that volatility is impacting on most other sectors of agriculture at the present time, as is the recent strengthening of Sterling against the Euro. We have calculated that a combination of exchange rate changes and the introduction of the new entrants’ scheme will reduce Single Payments on many farms this year by as much as 30%”.