Lakeland CEO predicts an unavoidable drop in milk prices

Lakeland Dairies CEO predicts further contraction of milk prices in the short-term

Lakeland Dairies has warned that milk prices are likely to contract in the short-term as markets continue to determine returns. The dairy cooperative’s group CEO, Colin Kelly, spoke to Agriland following the publication of the company’s annual report. Kelly said that the market was currently lower than the milk price, making a contraction “inevitable” in the short-term. The level of contraction remains uncertain. Kelly also warned that 2023 would be a challenging year for farmers.

Kelly noted that last year’s high prices for milk did not equate to similarly high margins. He said that input prices were currently at unprecedented levels, whilst milk prices had fallen, reflecting a drop-off in the market. Farmers face a “very tough period” over the coming months, he warned. Kelly added that the weather had also been unhelpful, with cows outside in February and back inside in April.

Lakeland Dairies has announced a further 6c/L cut in its milk price for February supplies. The cut was due to weaker market conditions affecting returns. In the Republic of Ireland, the cooperative reduced its milk price by 6c/L to 46.85c/L for February including VAT for milk at 3.6% fat and 3.3% protein. The February price includes an input support payment of 1.5c/L including VAT for all suppliers. In Northern Ireland, Lakeland Dairies reduced the milk price by 4p/L to 38.5p/L. The February price included a supplementary input support payment of 1.5p/L. It was the second consecutive month of reductions.

Lakeland Dairies is one of Ireland’s largest dairy cooperatives, with over 3,200 suppliers across 15 counties. The cooperative processes over a billion litres of milk annually, producing a range of dairy products, including butter, cheese, and milk powders.

Kelly acknowledged that farmers were moving into a crucial six-week period ahead of silage-cutting. He pledged that the cooperative would do “absolutely everything” to support its shareholders and suppliers, but warned that further milk price correction was inevitable.

The announcement of the cut came as Lakeland Dairies published its annual report. The report revealed that the cooperative’s revenues for 2020 rose by 1.6% to €1.07bn. Pre-tax profits were down by 10.2% to €17.2m. The cooperative also invested €31.3m in capital expenditure last year.

Lakeland Dairies has continued to expand its operations in recent years. In 2020, the cooperative acquired the dairy business of Fane Valley Co-op in Northern Ireland. The acquisition added a further 200 million litres of milk to Lakeland Dairies’ processing capacity.

The cooperative has also invested in new technologies to improve efficiency and sustainability. In 2020, it opened a new €40m milk powder plant in Bailieboro, County Cavan. The plant uses advanced technologies to reduce energy consumption and minimise waste.

Lakeland Dairies has committed to achieving carbon neutrality by 2050. The cooperative has already made progress towards this goal, reducing its carbon footprint by 10% between 2018 and 2020. It has also invested in renewable energy, including solar panels and wind turbines.

Lakeland Dairies’ commitment to sustainability has been recognised by a number of awards. In 2020, the cooperative won the Sustainability Initiative of the Year award at the Agribusiness Awards. The award recognised Lakeland Dairies’ efforts to reduce its carbon footprint and promote sustainable farming practices.

Despite the challenges facing the dairy industry, Lakeland Dairies remains optimistic about the future. The cooperative is committed to supporting its suppliers and shareholders through difficult times, whilst also investing in new technologies and sustainable practices to secure a brighter future for Irish dairy farming.

Categories: Agriculture