Lakeland commits to principle of fixed price contracts

Michael Hanley, Chief Executive, Lakeland Dairies
Michael Hanley, Chief Executive, Lakeland Dairies

Lakeland Dairies is investigating the feasibility of offering long term, fixed price milk contracts to its farmer suppliers, according to the organisation’s’ chief executive Michael Hanley.

“But these will only work on the basis of our customers, farmers and, of course, the co-op itself, being happy with the arrangements drawn up,” he said.

“Lakeland is totally committed to delivering the best possible price on-farm. We also recognise the importance of putting in place measures that will help producers cope with the ongoing challenge of volatility.”

Hanley spoke at an Ulster Farmers’ Union meeting in Cookstown earlier this week. He confirmed that the co-op is on target to process 1.1 billion litres of milk this year.

“Milk volumes currently coming into the co-op are running in excess of 10% ahead of this time last year,” he said.

“In the Republic of Ireland this is working out at 12%: the equivalent figure for Northern Ireland is 9%.”

Mr Hanley confirmed that international milk markets had started to stabilise over recent weeks.

“The New Zealand milk auction has started to strengthen over recent weeks, albeit from a very low base,” he said.

“There is also the prospect of dairy farmers in New Zealand cutting back on output over the coming months. Intervention is now working within the EU, but again at extremely low price levels. However, the system is acting to take surplus milk powders off the market for up to a year. And this is a good thing.

“But we still need a further realignment of world milk production patterns, in order to bring global dairy output more into line with consumption.”

Mr Hanley expressed concern at the recent downturn in the Chinese economy.

“But my biggest worry regarding the prospects for dairy in Northern Ireland is the current strength of Sterling,” he said.

“The weaker the £pound, the easier it is to export food product from any part of the UK.”

The Lakeland CEO said that international dairy markets may start to strengthen over the coming months.

“But it may take until the spring of 2016 to get prices back up to levels at which milk producers in Northern Ireland can return to some form of profitability.”