Arrabawn CEO Conor Ryan has told suppliers that the Co-op will be doing its best to ensure they are supported through the challenging twelve months that lied ahead for the dairy industry.
Speaking at Arrabawn’s AGM at the Abbey Court Hotel, Nenagh the CEO revealed that 2015 margins were sacrificed by 1% to support suppliers as milk price spiralled downward and that the Co-op would continue to provide support to its 950 plus suppliers.
The AGM heard that operating profit in 2015 of €2.1m was healthy in the context of the very challenging year for the industry.
This was, however, down €2.3m on 2014. Average milk price was 30.4c/L but milk volumes processed hit record levels of 353m litres, up 15% on 2014.
Ryan said that the coming 12 months will continue to be tough but he urged suppliers who have debt issues to talk to the co-op, which would continue to be supportive in anyway it can, including with competitive feed and fertiliser prices at its agri-trading division.
“The next six to 12 months will be tough but the co- op will do all it can to ensure farmers get maximum support through this period.
“The milk markets are not a pretty picture right now,” he warned.
Ryan said world milk supply from January to March this year is up almost 4%, which he described as ‘phenomenal’.
“Some 80% of the increase in global milk supply is coming out of Europe and four countries, Holland, Germany, Ireland and Poland, account for 60% of that.
“Ireland, in turn, is two third of that. The demand side is being helped by lower prices yet consonsumption is not improving,” he said.
According to Ryan we were being asked why the cheque payment had gone down so much and it purely reflects in the oversuply in the market and, he said unfortunately, postiives are scarce enough.
Is there any green shoots?
Ryan said the only thing we are seeing is, as a resut of low milk prices, declines in supply in the UK and France and last week in Germany in a significant way.
In terms of volumes last year, the Ryan said that there was a 19% increase in milk processed and 13% for Arrabawn suppliers. On the year to date, volumes are up again, by 18%.
“This year the emphasis is on coping with our own milk and outside milk will only be taken-in if we are in a comfortable position to do so. The priority in the factory will be for our own suppliers,” he added.
He said that the major capital spend on evaporaters, gas and CIP systems had been completed and the focus for 2016 is on improving process, ensuring the plant is operationally excellent and meeting customer expectations at the highest level.
Liquid milk
Reflecting on liquid milk, 2015 was he said a good year and 2016 had started well also. The plant, he continued, is in good shape, now with BRC ‘AA’ approal, up form ‘A’ approval. The last BRC audit was the first ever in which the there were ‘no non-conformances’.
The Co-op, he continued, had also won Tesco approval and netted a very strong contract that starts at the end of June, while additional Aldi business was also secured.
Agri business
The AGM heard that the Agri Trading division experienced 2% growth in 2015, mostly coming from retail and feed but margins on feeds and fertilisers were extremely tight. There was a strong start to 2016, in particular on feed, with fertiliser being slow initially but picking up over the last few weeks.
Losing suppliers
Addressing the gathering, Chairman Sean Monahan said that 2015 was a transition year for the dairy industry. There was, he said, some loss of suppliers in the transition to post-quota but Arrabawn had also gained suppliers.
“We very much regret that some people left the society but we welcome the new members and some of them are here with us today. At the end of 2015 we had more suppliers than at the start and more milk than ever supplied by our own suppliers, which are positives for the society,” he said.
“As farmers we are all concerned at the current milk price and where it is heading. As Chairman, and on behalf of the Board, I can assure you that the Board will do as much as possible to support milk price again this year,” he said.