‘Consolidation of dairy processing inevitable, but not for 18 months’
Lakeland Dairies CEO Colin Kelly with the Minister for Agriculture Charlie McConalogue and Lakeland Chairperson Niall Matthews at a recent meeting in the co-op.
Consolidation of dairy processing in Ireland is "inevitable, but it won't happen in the next 18 months, according to the CEO of Lakeland Dairies Colin Kelly.
"I don't think it will happen in 2024 or 2025. Until the Derogation piece becomes clear, I don't think anything will happen. It's inevitable there will be consolidation (after that). There has been nothing but consolidation every decade if you look back. That will be sped up if you have less milk and less natural efficiencies everyone will be looking for synergies.
"There is going to be less milk around and I don't think people are necessarily looking for suppliers, ultimately the co-op model is strong and people are loyal to the co-op....I think what people want is to see milk flows growing from existing suppliers. But if there was milk pools moving about I'm sure people would be entertaining that.
"There is a move to fill what everybody has, rather than to look for extra."
He told the Farming Independent that 25pc of its Republic of Ireland milk pool is currently coming from farms in Derogation, but the co-op does not have a contingency plan if Ireland loses its Derogation.
"It's a huge concern. If we do lose the Derogation it's catastrophic for the industry. We don't have a contingency plan, but if it does happen ultimately we will see us with less sites, the same as you will see farmers with less cows."
The co-op, he said, is engaging with the powers that be on the situation. "Irish dairy has a unique profile and it's important that is acknowledged at a European level.
"It is a decision outside of Ireland, we are trying to make sure the people who represent Ireland understand the plight of rural Ireland this would cause if we lose the Derogation."
On the possibility of mergers, he said, the co-op would be reactive rather than proactive as due to its resizing strategy "the last thing we need is more facilities".
Milk prices are "probably slightly ahead of the market", but he said he was reasonably confident it will remain the same for the rest of the first half of the year.
"Ultimately it will be about supply in the second half of the year....but supply has been the market's friend over the past six months. What happens to supply will dictate the price in the second half."
