The chief executive of Lakeland Dairies has reiterated warnings for the short to medium term on milk price.

Speaking to the Irish Farmers Journal at the Tullamore Show on Sunday, Michael Hanley said the global market remains weak and is unlikely to change for the next nine months.

“Currently, given the volume of product which has been sold forward out of the New Zealand auction until January next year, at low prices, that is pulling down the entire market,” Hanley said.

“Dutch prices are falling as we speak. Co-ops in Ireland have subsidised price and paid as much as possible but you can’t defy the law of gravity – the market is oversupplied. There is a wall of milk versus the demand ... there needs to be a correction factor, whether that’s an El Niño or a reduction in feed or whatever, but there needs to be a correction.

“Until that happens, you’re looking at a weak market for the next nine months.”

The board of Lakeland will meet on Thursday (13 August) to set its July milk price and Hanley moved to reassure farmers. “From a Lakeland perspective, we will pay as much as possible for a litre of milk without compromising investment in the business.”

Joint ventures

Just a week ago Hanley confirmed a joint venture with Fane Valley in Northern Ireland, which has resulted in Lakeland growing its milk pool to 1bn litres and makes it the second largest processor on the island. Hanley said the deal would result in cost savings which could be passed back to farmers.

“[Prior to the joint venture] there was a significant amount of overlap so there will be a rationalisation of lorries there so no two trucks will be going down the one lane,” Hanley said. “Putting a number on it [savings to farmers] at this stage is difficult as there is due diligence to do. We have plans to put in place, but we know there is a lot of overlap.”

Regarding the joint venture itself, Hanley said: “It’s an opportunity to grow the business and it’s an opportunity to consolidate the business ... we’ve had a very positive reaction, both north and south.”

Listen to the full interview with Michael Hanley