The potential effect of border controls on the dairy sector, implemented as a result of Brexit, were made clear last week by Dr Mike Johnston, the chief executive of Dairy UK in NI, during a briefing session with the NI affairs committee at Westminster.

The session was part of a wider inquiry by the committee of MPs into the future of the land border in Ireland post-Brexit. In his evidence, Johnston outlined the serious consequences that could come from the UK stepping out of the EU, and potentially having to trade with Europe under World Trade Organisation (WTO) rules. That would mean that companies have to factor in tariffs when trading with customers (until specific trade deals are done). He estimates that tariff rates of around 30% would have to be added to prices. “It would just kill that business,” said Johnston.

The latest estimates from DAERA suggest that nearly half of sales from NI dairy processors are outside of NI and Britain, with significant trade into the Republic of Ireland, to other EU member states and to the rest of the world. Add in the fact that around one-quarter of raw milk produced in NI moves south for processing each year, it suggests there is a major problem to be overcome.

However, with the UK not self-sufficient in milk (estimated at around 80%), surely there are also major opportunities for NI suppliers in the British market post-Brexit? “I would expect to see some of the dairy companies looking at a rebalancing of their market portfolios,” acknowledged Johnston.

However, he maintained that the approach is only short to medium term, and to get sustainable long-term growth, processors must be able to export.

Listen to a discussion of the latest Brexit developments in our podcast below:

Listen to "UK to exit the single market after Brexit" on Spreaker.

The other issue for the NI dairy industry is the trade in raw milk and partly processed product across the Irish border.

Up to 25% of the 2.2bn litres of milk produced annually in NI is processed in southern Irish factories.

The majority of this milk is processed by Lakeland, along with other companies such as Aurivo, Glanbia and Green Pastures.

With a £30m investment by LacPatrick in a 7.5t/hour drier coming on stream in Artigarvan this year, it will certainly add significantly to milk processing capacity in NI.

But for the likes of Lakeland to be able to process all of its milk collected here, it would have to spend big in either Pritchitts in Newtownards or in the former Fane Valley factory in Banbridge.

That facility looks set to remain closed for the foreseeable future, and whether it will ever return will probably depend on Brexit and if the Government puts up money to enhance processing capacity within the UK.

The stark reality put by Mike Johnston is that without sufficient processing capacity at present, a hard Brexit could mean that some farmers go out of business.

“We would have to have sufficient transition time to be able to invest in new processing facilities to be able to handle the quality of milk produced in NI,” he said.

The other important point he raised with MPs was on how the industry would handle a breakdown during peak supply months (distressed milk).

“If we were not able to move that milk south to be processed, we do not have the facility to be able to destroy that milk (in NI).

‘‘We would have a major dilemma if we had that sort of a scenario playing out,” he said.

Brexit border controls to affect Irish dairy industry

The movement of milk across the island of Ireland is vital to the NI dairy industry.