In the last five years alone over €1.3bn was invested in milk processing capacity in the Republic. This effectively continued the first wave of investment that took place prior to 2015 to allow for the early post-quota surge in milk produced. Since 2015, dairy cow numbers have increased from 1.3m to 1.5m and average yield has increased from 4,900 litres per cow to 5,300 litres per cow. Last year, just shy of 8bn litres of milk was produced in the Republic.
The surge in milk supply at farm level was made possible by the investment in processing capacity and technology upgrades at processing level. Ultimately it’s the farmer and the milk supply that pays for this and hence it’s important to call out the investment.
Without the investment there would be an effective limit on production that wouldn’t have allowed as much growth at farm level. It is also important to note that milk price is affected if a business is undergoing significant investment in milk processing.
Bank repayments, returns to suppliers, and ongoing upgrades suck money out of the business that otherwise might have gone to milk suppliers to pay for higher milk prices.
Figure 1 shows the most recent investments by some of the big players. Dairygold and Glanbia have invested the most as they have seen significant growth at farm level and both processors have not capped production from member suppliers.
In the last five years, Glanbia has invested at Belview, Ballyragget, Portlaoise and Virginia. Dairygold has invested at Mallow, Mogeely, and Mitchelstown. Aurivo has invested at Ballaghaderreen and Killygordan. Arrabawn has invested at Nenagh and Kilconnell. Carbery has invested at Ballineen. Tipperary Co-op has invested in drying facilities and effluent treatment at Tipperary Town. Lakeland Dairies has invested at Artigarvan, Bailieborough and Cavan. Kerry has invested at Charleville, Listowel and Newmarket.
Currently, more than 50% of Ireland’s product is exported out of Ireland as cheese – of which 83% is cheddar destined for the UK. Recent investments have looked to diversify out of cheddar into making continental-type cheeses such as gouda, edam and mozzarella (Glanbia and Carbery).
Also, Dairygold is partnering to make Jarlsberg cheese in Mogeely. Last year, Glanbia completed a €35m investment in its Wexford cheese plant which doubled capacity. The rest of the investment has mainly been in drying facilities to make powders for export to far away markets. Other investments have seen Ornua invest in butter processing in Mitchelstown and Arrabawn in casein.
What it means:
Understanding the
annual milk price review
The record will show 2020 was a pretty decent year for milk price and importantly a relatively normal year on farm costs. It’s fair to say that, while it is some time ago now, 2019 was similar.
In our annual review this year, similar to last year, we are presenting a more complete package of results. No longer is it good enough to look at milk prices in isolation. The balance sheet and investment in processing capacity are two other legs of the stool that are important to keep in mind when assessing businesses.
While it is late in the year to be reviewing 2019 results, so far we have found it is only possible to complete this work after all annual accounts have been published. This year, COVID-19 restrictions limited speed of completion further.
KPMG has reviewed all information presented by each processor. The Milk Price Review exercise is simply the money paid out for all manufacturing milk supplied in the calendar year divided by total litres supplied – all milk-based payments included.
With greater complexity of pricing systems, the Irish Farmers Journal/KPMG Milk Price Review is now more important than ever to provide clarity to farmers. Milk price is ranked on net price paid after deduction of levies and charges as this is the fairest comparison. Most manufacturing milk processed in the Republic is included in the review, but some co-ops such as Arrabawn, Aurivo, Boherbue and North Cork decided not to participate in the review.
Conditional somatic cell count bonuses are included in the payout, as are premiums paid for better fat and protein in milk. Hence, processors with higher quality and better milk solids will rank higher.
Monthly milk leagues
Our monthly milk leagues are often undermined at processor level but their role is to inform farmers to allow them to compare prices between processors as the year develops.
We have often seen significant top-ups and shifts in milk price from processors at various intervals depending on price developments and competitor pricing. The construction of the monthly leagues is different to this annual review as it ranks a base monthly price on euro per kilo milk solids (3.47% protein and 4.11% fat) and c/litre at 3.3% protein and 3.6% fat.
Read more
2020 Vision: the changing shape of global milk production
Glanbia AGM reassures suppliers co-op is on right track
Milk price benchmarks important
In the last five years alone over €1.3bn was invested in milk processing capacity in the Republic. This effectively continued the first wave of investment that took place prior to 2015 to allow for the early post-quota surge in milk produced. Since 2015, dairy cow numbers have increased from 1.3m to 1.5m and average yield has increased from 4,900 litres per cow to 5,300 litres per cow. Last year, just shy of 8bn litres of milk was produced in the Republic.
The surge in milk supply at farm level was made possible by the investment in processing capacity and technology upgrades at processing level. Ultimately it’s the farmer and the milk supply that pays for this and hence it’s important to call out the investment.
Without the investment there would be an effective limit on production that wouldn’t have allowed as much growth at farm level. It is also important to note that milk price is affected if a business is undergoing significant investment in milk processing.
Bank repayments, returns to suppliers, and ongoing upgrades suck money out of the business that otherwise might have gone to milk suppliers to pay for higher milk prices.
Figure 1 shows the most recent investments by some of the big players. Dairygold and Glanbia have invested the most as they have seen significant growth at farm level and both processors have not capped production from member suppliers.
In the last five years, Glanbia has invested at Belview, Ballyragget, Portlaoise and Virginia. Dairygold has invested at Mallow, Mogeely, and Mitchelstown. Aurivo has invested at Ballaghaderreen and Killygordan. Arrabawn has invested at Nenagh and Kilconnell. Carbery has invested at Ballineen. Tipperary Co-op has invested in drying facilities and effluent treatment at Tipperary Town. Lakeland Dairies has invested at Artigarvan, Bailieborough and Cavan. Kerry has invested at Charleville, Listowel and Newmarket.
Currently, more than 50% of Ireland’s product is exported out of Ireland as cheese – of which 83% is cheddar destined for the UK. Recent investments have looked to diversify out of cheddar into making continental-type cheeses such as gouda, edam and mozzarella (Glanbia and Carbery).
Also, Dairygold is partnering to make Jarlsberg cheese in Mogeely. Last year, Glanbia completed a €35m investment in its Wexford cheese plant which doubled capacity. The rest of the investment has mainly been in drying facilities to make powders for export to far away markets. Other investments have seen Ornua invest in butter processing in Mitchelstown and Arrabawn in casein.
What it means:
Understanding the
annual milk price review
The record will show 2020 was a pretty decent year for milk price and importantly a relatively normal year on farm costs. It’s fair to say that, while it is some time ago now, 2019 was similar.
In our annual review this year, similar to last year, we are presenting a more complete package of results. No longer is it good enough to look at milk prices in isolation. The balance sheet and investment in processing capacity are two other legs of the stool that are important to keep in mind when assessing businesses.
While it is late in the year to be reviewing 2019 results, so far we have found it is only possible to complete this work after all annual accounts have been published. This year, COVID-19 restrictions limited speed of completion further.
KPMG has reviewed all information presented by each processor. The Milk Price Review exercise is simply the money paid out for all manufacturing milk supplied in the calendar year divided by total litres supplied – all milk-based payments included.
With greater complexity of pricing systems, the Irish Farmers Journal/KPMG Milk Price Review is now more important than ever to provide clarity to farmers. Milk price is ranked on net price paid after deduction of levies and charges as this is the fairest comparison. Most manufacturing milk processed in the Republic is included in the review, but some co-ops such as Arrabawn, Aurivo, Boherbue and North Cork decided not to participate in the review.
Conditional somatic cell count bonuses are included in the payout, as are premiums paid for better fat and protein in milk. Hence, processors with higher quality and better milk solids will rank higher.
Monthly milk leagues
Our monthly milk leagues are often undermined at processor level but their role is to inform farmers to allow them to compare prices between processors as the year develops.
We have often seen significant top-ups and shifts in milk price from processors at various intervals depending on price developments and competitor pricing. The construction of the monthly leagues is different to this annual review as it ranks a base monthly price on euro per kilo milk solids (3.47% protein and 4.11% fat) and c/litre at 3.3% protein and 3.6% fat.
Read more
2020 Vision: the changing shape of global milk production
Glanbia AGM reassures suppliers co-op is on right track
Milk price benchmarks important
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