Weaker sterling has been good news for Dale Farm, says boss
World dairy markets look set to remain reasonably stable through to the autumn of this year, according to Dale Farm chief executive Nick Whelan.
"We have seen a contraction of supply across all of the world's main dairy regions over the past number of months," he said.
"Adding to this market-strengthening effect has been a slight pick-up in demand from customers in China and North Africa."
Speaking at the Balmoral Show, Mr Whelan admitted that Dale Farm, Northern Ireland's largest dairy co-op, had benefited from a weaker sterling to the tune of 15% over the past 12 months.
"One negative is the fact that oil prices have remained reasonably weak," he said.
While hesitant to predict how all of these factors will be reflected in future producer prices, the Dale Farm CEO confirmed that the co-op had committed to pay 25.8p a litre for April milk.
"Forecasting milk prices is a bit like predicting the weather in this part of the world - it is fraught with difficulty.
"Just four weeks ago I was of the view that we might have to pull our prices as we headed into the 2017 spring flush. But, thankfully, this has not turned out to be the case."
Looking towards the end of the year, he indicated that New Zealand was gearing up for a significant increase in milk output, to coincide with its spring flush.
"We will wait and see how that transpires," he added.
However, he did say that Dale Farm will continue with its winter bonus scheme in 2017. This will see the co-op pay an additional 2p/L above base for milk supplied in October, November and December.
"We will also push ahead with our winter production premium in 2017. As was the case last year, farmers will receive an extra 4p/L on all extra milk produced during the period of the winter premium," he said.
"This year the increase will be measured against recorded production levels in October, November and December 2015."
He also confirmed that Dale Farm wanted more milk.
"We want all new entrants coming into the dairy industry to commit to a long-term future with Dale Farm. Our main milk growth will be through our existing members and we will take on some dairy farmers supplying other processors if it is right for our business."
He justified the desire for more milk, given the growth in demand from Dale Farm's customer base.
"A number of our retail customers are showing a 20% annual growth in their cheese businesses," he said.
Mr Whelan indicated that outsiders looking in may be of the opinion that Dale Farm was well set up to cope with Brexit when it happens.
"Yes, all our processing facilities are in the UK, as are all our milk suppliers, and we are 100% Red Tractor (quality assured).
"In addition, 85% of our total output is sold to customers in the United Kingdom.
"The UK is far from being self-sufficient where the likes of cheese, butter and yoghurt are concerned.
"And, of course, we have benefited from the weakening of sterling that followed the EU referendum result."