Lakeland buoyed by dairy market upturn

"It is a good time to be a dairy farmer; looking at the five to 10 year horizon the prospects for dairying are positive." So observed Lakeland Dairies chief executive, Michael Hanley, when speaking with The Anglo-Celt on Lakeland's annual report published this week. As Ireland's second largest dairy processor, Lakeland reports a 23% increase in income to €401m and operating profit of €4.5m for the year ended December 31, 2010. Mr Hanley was visibly upbeat about the current and prospective outlook for the dairy co-operative, which processes 660 million litres of milk annually from farmer suppliers in the Republic and the North. Lakeland manufactures a wide range of dairy products overwhelmingly for export. Developing further those markets in Asia, Africa, the Americas, the UK and continental Europe are the objectives of the co-op, which reports a growing interest among young farmers wishing to enter milk production. Remarking that 2009 was a poor year for the agri-sector in general, Mr Hanley said that it was good to see the turn-around in 2010 driven by increased global demand for dairy products. Lakeland's food service and food ingredients businesses are a big element of the UK market, which continues to be of key importance to the co-op. Along with the UK the African market is the other main focus of Lakeland exports while the growing Chinese market also has massive potential, revealed Mr Hanley. The increase in milk price Lakeland pays to its suppliers has risen from a floor of 22c a litre in 2009 to 30c a litre at year end in 2010. "We led the price increase in December before anyone else in the country," he pointed out, adding that strong buoyancy towards the end of 2010/early 2011 was tempered by extra milk volume at global level from competitor countries. This tended to soften the market in recent weeks, he said. However, Mr Hanley said that Lakeland was optimistic for the future of the co-op from the business perspective and for dairy farming. "We feel that the dairy market has potential for continued growth in demand and Ireland is a sustainable place to produce milk on an ongoing basis," he said. Reflecting again on the 2010 upturn Mr Hanley said the change in fortune was facilitated by weather improvement that enabled farmers to reduce the cost of production and the increased global demand for dairy products. The improvement in the beef sector also benefited dairy farmers, giving a better return for the calf output of the dairy herd, he said. A summary of the Lakeland Dairies annual report reveals that the co-op exports to some 70 countries offering about 170 branded products. The co-operative has a strong balance sheet and finished the year with shareholders funds of €76.7m. Foodservice operations performed strongly with a 14% increase in revenues to €130m accounting for 32% of Lakeland Dairies' total income. Food ingredients revenues of €232m increased by 31% on the previous year buoyed up by developing markets in Russia, China, India and the Middle East. The opening of a new €20m milk powder plant in Bailieboro enabled a major consolidation of the processing operations. Lakeland's agri-trading division reported a 15% increase in revenues to €39m producing over 150,000 tonnes of high quality ruminant feeds from its mills and supplying a range of farm inputs to customers throughout Lakeland's 15 county catchment area. One third of Lakeland's milk supply now comes from Northern suppliers. The Northern Ireland share of the Lakeland milk pool grew by nine per cent last year and is set to grow due to factors such as the UK being under quota, so there are no difficulties in that area. With Lakeland being three to four per cent under quota in recent years the co-op has some room to manoeuvre. The prospects of dairying are good and with agricultural colleges such as Ballyhaise having a full complement of students the agricultural sector could be about to embark on a renaissance. Lakeland Dairies Chairman, Padraig Young, said that Ireland's dairy sector with exports worth over €2bn annually, has provided an important source of hope for the Irish economy, sustaining a considerable number of incomes, jobs and families. It appears that entities such as Lakeland Dairies are now set to play an important part in Ireland's economic recovery.