The United group processing company, Dale Farm, has handled 700m litres of milk in the past year. Compare that with 260m litres processed in the year that Dobbin arrived. At that time, United bought 920m litres, the majority of it sold on by auction or by option allocation to other processors based in Northern Ireland. Since 1999, the group has made 16 acquisitions.

Several other processing operations have not survived. Now there are few other buyers for United’s 880m litres. Dale Farm and Glanbia Cheese are the predominant customers. Ballyrashane and Fane Valley co-ops opted to buy directly from farmers because the United group was seen to be losing suppliers and expanding its own processing. While the volume of milk has not dropped much, the number of members of United has fallen markedly.

Many members are unsettled at present after a period in which the prices paid by United for ex-farm milk have been relatively low. There is rumour and innuendo about the future of the business of Northern Ireland’s biggest milk producer co-operative.

James Campbell asked David Dobbin how he sees it.

James Campbell: Some people say that you don’t mind if you lose suppliers. Is that true?

David Dobbin: “I don’t want to lose any member of United. But I see that we are like a big, unfenced game reserve of milk producers into which poachers have easy access and they can make various offers to capture the producers that they find most attractive. The total irony is that producers would be in a weaker position and the prices paid for milk in NI would be poorer if Dale Farm was not here.

“Processors based in southern Ireland pay more for milk in the north. A price of 30c/litre, less the Republic’s VAT element of 5.2% and converted at current exchange rates, is just around sterling 20.4p/litre.

“Northern Ireland is about to lose a big advantage, whereby producers here could expand their output of milk and the whole industry has grown, while milk output elsewhere in Europe was restricted. This included the Republic of Ireland, so it was no wonder that processors there looked north for the opportunity of additional milk.”

JC: What about United’s milk price, which has generally been at the bottom of the league in NI?

DD: “Milk producers are hurting and I know that members of United Dairy Farmers have been disappointed (or worse) by the milk price that we have been able to pay in recent months. We believe that others are living beyond their means in the price that they are paying for milk. This happened at First Milk producer co-op in Britain, where they lost £12m because they paid out more than they were getting in. In Dale Farm, we haven’t lost money during the past year, but we haven’t made money. We would not borrow to boost our milk price. We have been prudent as we must maintain the business.

“Dale Farm has processed 700m litres this year. That’s up from 395m litres processed three years ago. Others are talking about increasing by 50%, but Dale Farm is already up by 77%. Had we not geared up to process the higher volume there would have been nowhere for our members’ milk to go when the market turned down.

“We were unfortunate in the timing. The Russian ban meant that there was 200,000t of cheese within the EU trying to find a home and this hit prices hard at a time when Dale Farm was building up stocks and trying to expand sales of cheese. It could have choked us, but we’ve come through it and much of our borrowing is in stocks of cheese.

“We did all this without charging a capital levy or introducing any share-up schemes, such as those brought in by some other co-ops (such as First Milk in Britain and Aurivo in the Republic of Ireland). But it did hit our milk price.”

JC: Why should anyone expect United’s price to be more competitive?

DD: “Two thirds of the milk we process this coming year will be going into consumer products, versus only 40% a year ago. We have made our investments ahead of others and got to the market ahead of the expansion in southern Ireland. In 2015-2016, Dale Farm will have its lowest capital spend for at least five years and we don’t have any major investments planned. We will pay down our debt from cashflow, basically from depreciation. The challenge is to do so while interest rates are low.

“I’m under no illusion about our milk price. We need to pay a more competitive milk price and that is our number one aim now. We did pay a very competitive price in 2013 and we can do so again. We are also going to introduce bonuses on milk supplied in October and November, to help offset added costs for winter milk production.

“As Dale Farm secures more long-term contracts for its sales of consumer products, especially butter and cheese, the company will offer longer-term fixed-price contracts for a portion of the milk that it buys from members.

“For example, you might be able to lock-in the price for three, six or 12 months ahead on 10% of your production. Then every three months add another 10% on a different fixed-price forward contract and so on. This will be on a voluntary basis for any member who wishes to take it up.”

JC: Members in NI have been annoyed to see higher prices paid to milk producers supplying Dale Farm’s operation at Kendal in the north of England. How do you respond?

DD: “It hasn’t always been that way. We’ve had years when the price paid in England was below the price paid in NI. Averaged over 24 months the prices have been similar. The prices for milk going into the Dale Farm business in Cumbria have been 2p-3p/litre higher than prices in NI over the past year.

“That reflects the market for consumer products. All of the output from that factory in Kendal is 100% consumer products – no commodity output. During the past year, that has delivered profit and a higher milk price. The delivery profile is almost flat year-round (1.1 peak to one trough in milk supplies). It’s a template for what I’d want to see for our members in NI, with more milk going into higher-value products returning a better milk price”.

JC: Are you pinning your strategy on consumer products?

DD: “The problem with commodities is that you get spikes in price, which are the source of much volatility in dairy businesses. Over a period of three to four years, consumer products beat commodities and are definitely less volatile.

“You can’t buck the market, but you can choose the market that you’re in. We’re pinning our strategy on Red Tractor and the strength of the trend towards ‘buy British’ – a market that pays in sterling pounds, that we can serve as 80% of Dale Farm milk is from Red Tractor-assured farms and we are part of the UK. We still want to export some product outside the UK, but we want less exposure to the currency exchange problems. And we don’t see ourselves being able to compete on bulk commodity powder when compared with the massive new factory in Kilkenny or the Fonterra plants in New Zealand.

“Make no mistake, consumer products are also very competitive markets. But we now have 10% of the UK retail cheddar market and the food service butter market. We have 25% of the UK cottage cheese market.”

JC: What about rumours that the Dale Farm business will be sold?

DD: “Our business is not for sale, nor have we been approached by anyone seeking to buy it. I’d have to acknowledge that you should never say never. If we don’t grow, we’ll go. That’s the way business operates. Dale Farm is too big now to be a niche player. I believe it is strategically important to have a sizeable Northern Ireland-owned company in the dairy sector. We have had companies owned by outsiders and look how many have gone.

“A locally owned co-op with headquarters in Northern Ireland and with decisions made in the interests of members is what we are about. We are close to getting the dividend for all the effort and investment we have put in. The heavy lifting has been done. There is still some work to do, but I’m keen to harvest what we have sown.

“Dale Farm has become one of the biggest cheese manufacturers in the UK. Our production capacity is similar to Dairy Crest and above both Lactalis and First Milk. We have the best and most cost-effective cheese processing business in the UK and Ireland.

“In the last year, we have doubled the amount of cheese being sold as consumer products (up by 112%) and reduced our sales in the lower returning bulk wholesale market. The acquisition of Ash Manor in 2014 gave us the capacity to supply grated and sliced cheese for retail and food service.

“Ash Manor had capacity for 20,000t/year and we’ve added 14,000t/year of ZIP pack capacity at Dunman (Dale Farm’s factory near Cookstown). We now have 14 packing lines (not long ago it was three).

“The acquisition of Fivemiletown cheese brands has brought a range of speciality cheeses into our portfolio and given Dale Farm access to cheese buyers that we couldn’t previously reach.

“We are being taken more seriously and have got new listings for Fivemiletown cheeses in the UK and Europe, alongside which we are able to sell Dale Farm cheddar. Breaking into the consumer cheese market is not easy – we are trying to do very quickly what the Irish Dairy Board has built up over many years.

“One of the big successes of the past year has been the listing as cheddar cheese supplier to Lidl across the UK and Europe, which brings great potential for growth with their expansion. The Lidl and Aldi model of retail is enjoying major success, but they still only account for 10% of the British market. We have to be a bit wary of markets in Europe with the weakening euro exchange rate against sterling. That’s why our strategy is strongly angled at the British market”.