Glanbia chair Martin Keane says Glanbia milk suppliers should expect lower prices than their European counterparts for two reasons.

Number one is Glanbia product is sold into commodity markets, and not fresh milk products. Secondly, the Glanbia target of 3.2% profit after tax is more challenging than what is achievable on the continent.

In an extensive interview with a Dutch online portal, Keane is quoted as saying: “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.”

Turning off the tap

Keane goes on to say that Glanbia’s growth in milk collection should be reduced, and it is likely that a two-tier milk pricing structure for Glanbia farmers will develop in coming years. Keane also hints at the alternative, suggesting farmers might have to write a cheque specifically for further investment if they want to produce more milk.

This is despite the fact that farmers have and are already investing in the processing capacity.

I do see this unlimited growth ending soon

In the article, Keane is quoted as saying: “Rule number one in a dairy co-operative 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 also suggests that the free-for-all production allowed for the last four years since quotas were removed is coming to an end: “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.”

Poor marketing

When asked why Ireland Inc doesn’t make more use of the narrative around lower stocking rates and the grass-based production system when marketing Irish dairy product, he suggested we weren’t doing enough in that space and need to up our game.

He said: “Consumers are more and more sensitive to these kinds of soft skills and the feeling behind them. You see that everyone tries to make this connection to nature, and we have not done this enough, so we will step up our game. There is much potential there.”

On mergers he said the joint venture with Dutch company A-ware was going to be difficult and was going to have to be subsidised financially. He is quoted as saying: “We know that the first three or four years will not be pretty, that we need to add money. We can limit that with good management.”

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