No improvement in sight for dairy

John Harrison/Harrison Photography
John Harrison/Harrison Photography

Dairy markets have continued to deteriorate – a situation made worse for the Northern Ireland milk industry by further gains in the value of sterling versus the Euro, according to United Dairy Farmers’ Group CEO David Dobbin.

“Global milk output is continuing to run well ahead of last year and demand is still weak with the Russian trade ban renewed and Chinese dairy imports running at less than half last year’s level,” said Mr Dobbin.

“The first powder has been intervened in Lithuania and it is likely that Northern Ireland powder processors will follow suit as current powder market returns are below intervention level. Intervention returns are very low, around 13.5 pence per litre at farm level due to exchange rates. There is no prospect of any immediate change in markets until milk output moderates or demand improves.”

Mr Dobbin added: “The EU Commission is unwilling to improve intervention prices claiming that the short term pain is necessary to reduce milk supply. This is worst market situation I have seen personally in my time in dairy.”
“ I am acutely aware of the personal hardship being faced by local dairy farmers.

“Dale Farm has improved its milk league price, however even the top of the table price falls well short of a living wage for farmers. We are working closely with the UFU and local politicians to lobby for more support for farmers including a more realistic intervention price. This is a global problem and can’t be solved locally we need concerted action on an international basis.”

Dobbin made these comments following this week’s publication of United Dairy Farmers’ results for the year ending March 31 2015.

For the period in question, group turnover was down slightly by 5% to £421 million, reflecting the impact of lower farmer milk prices and of lower feed prices and demand for feed in United Feeds against the previous record year.

Despite the very challenging trading environment of depressed dairy markets, Dale Farm – United’s commercial arm - delivered a 10% increase in turnover to £320 million, driven by a 27% growth in consumer sales, with packed cheese sales volumes up 53% and packed butter sales volumes up 30%.

Group operating profit fell by around 50% to £3.55 million due to the depressed market returns, especially from powder exports, made worse by adverse exchange rates with the pound gathering strength versus the Euro as the year progressed.

Strong organic growth in consumer cheese sales was further boosted by the full impact of the prior year acquisition of the Ash Manor Cheese business in Wales and the in-year purchase of the Fivemiletown Speciality cheese business.

During the year, farm gate milk prices roller-coasted, starting the year at a high of 32.4 pence per litre and finishing at 21.4 pence. This reflected a collapse in dairy markets driven by global overproduction in milk, weaker demand from China and a Russian ban on imports of EU dairy produce.

Commenting on the results, David Dobbin said:

“The volatility in dairy markets and milk prices reinforces the rationale behind our strategy to grow in added value consumer products and thus deliver a more competitive and stable milk price to our farmers. Dale Farm delivered another year of strong growth however profits were hit by depressed market returns and adverse movements in exchange rates, with the pound gaining significantly in strength versus the Euro.”

At the end of March 2015, United reached agreement with the NILGOSC pension scheme to withdraw from the scheme and cap its liabilities eliminating any future risk exposure. This resulted in a one off exceptional net book charge of £1.9 million.