Expansion of produce development

In a joint paper to the Agricultural Economics Society last week Larry Harte and John O'Connell of UCD questioned whether size of processor was the key in delivering an above average milk price to farmers.

A number of key conclusions emerged from a study of 18 dairy firms in eight European countries.

Once a firm got to the stage of handling two billion litres of milk there seemed to be little connection between milk price and size.

Firms that diversified did at least as well, if not better than firms that stayed specialised in dairy processing.

In their study the authors looked at three Irish firms - Glanbia, Kerry and Dairygold. They handled 4.2 billion litres of milk, had a combined turnover of 6.8 billion and in 2003 employed almost 27,000 people.

The German coop Nordmilch also had 4.2 bn litres, a turnover of $2.1 billion and employed just 3,500 employees. (It should be added that since then the German farmers' price has fallen further and much faster than the Irish price. This would seem to add weight to the argument that coops and milk processors which go into specialised products or go into successful diversifications can better maintain milk prices to dairy farmers.

Dairy support cuts continue

Dairy supports were cut further at last week's management committee meeting in Brussels. The casein production aid was cut a further 31% from €255 to €175 a ton. This is the equivalent of an aid level of 2ø cent/gallon. As recently as January '04 the casein aid was €2,140 a tonne or almost 28 cent a gallon equivalent.

At the same meeting the skim refund was reduced to €180/ton down from €645 a ton in January '04 while in the same period the butter export refund has been halved from €1,805 to €970 a ton. All of these cuts are far in excess of the 5% drop in support prices due in July.

In justification of them the Commission say that the dollar has strengthened, that there is a need for "internal market balance'' and that the forthcoming cut in support levels in butter and skim powder on July 1 must be factored in. Cheese has suffered similar cuts. Ireland was again the main user of butter intervention with nine companies selling to the intervention agency. The Department which acts as the Irish intervention agency here refuses to name the companies involved for "commercially sensitive reasons''.

Beef export refunds were also cut at last week's meeting when the rate on hindquarter cuts was dropped from €172 to 137.60/100 kg according to Bord Bia's market intelligence bulletin. Live refunds to Lebanon and Egypt were also reduced. The new rate is €32.80/100 kg down from €45/100 kg.

Again the reasons for the decreases were given as the strengthening of the US dollar.