‘Can’t sit on our hands’: Glanbia chairman on price and expansion

“Every dairy farmer should be able to choose his or her own direction – however, we do not have the luxury of sitting on our hands,” according to Glanbia chairman Martin Keane.

In a wide-ranging interview with Dutch dairy portal Dairy Global, the Glanbia group chairman discussed continued dairy expansion, milk price outlook and why Irish milk prices are lower than EU equivalents.

‘Unlimited growth ending soon’

Speaking to Dairy Global earlier this month, Keane noted the speedy expansion that has been seen in the Irish dairy sector in the past decade, starting from the 1.5 billion kilogrammes of milk processed by Glanbia in 2010, to the three billion kilos processed by Glanbia annually now.

That increase will be significantly less, leading up to 2030, than the 10% growth rate we saw in the past years. This is not sustainable.

“We cannot keep on investing €100 million a year in expansion and we cannot create the same value growth as we did in the past years,” Keane told the outlet.

The chairman noted that the global dairy market grows at a rate of 1.5% to 2%, meaning the rapid expansion seen in Ireland will not work going forward.

Asked about such speedy expansion he said: “I do not want a quota system: This puts the brakes on all potential and I do not want a repetition of 30 years in chains.

“Every dairy farmer should be able to choose his or her own direction. However, we do not have the luxury of sitting on our hands.

“We must match our members’ expectations and their appetite for expansion with Glanbia’s needs and market opportunities. I do see this unlimited growth ending soon.”

Continuing, the chairman told the Dutch outlet that, while nothing can be said without board support, they are “looking at the issue”:

Rule number one in a dairy cooperative is that we process all the milk our members supply. But that does not have to be done at the same price.

“So, pricing might be a barrier within this policy. The alternative is that we say, ‘we offer the opportunity for expansion, but do write a cheque so we can invest’.

“Nothing has been proposed or decided yet, though,” he stressed.

Milk price outlook

Asked by Dairy Global if the Irish milk price will remain lower than prices in the rest of the EU, Keane said they probably would.

“Our product mix determines our milk price. We do not have a large consumer market behind us – which pays a lot better than the commodity market for which we produce.

Over 90% must leave the island, which leads to additional costs. We aim for 3.2% profit after taxes. That is far more challenging than on the continent and puts pressure on the milk price compared to our competitors.

“These extra costs ensure that we always have to pay several cents per kilogramme less, but we can explain that perfectly. Our farmers have lower costs due to the seasonal milk production system.

“Farmers that produce all year round milk receive an additional bonus during the winter months and this milk price would be similar to a continental price,” the chairman said.