Food inflation warning as dairies say farmers face ‘sky high’ costs due to Ukraine war

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Consumers have been protected from price pressures when shopping for dairy products, but according to the head of one of the country’s largest dairy cooperatives, significant inflation will set in in the second half of the year.

For farmers, inflation is now absolutely ubiquitous. Feed, fertilizer and diesel prices have skyrocketed. The price of fertilizer has quadrupled,” said Michael Hanley, CEO of Lakeland Dairies, the country’s largest cross-border dairy processor.

Ukraine and Russia are Europe’s most important fertilizer suppliers.

Global milk production has been subdued, meaning farmers may be passing this on, but long contracts with supermarkets and stockpiles of butter, cheese and other dairy products have yet to feel it, he said.

“The price of butter in international markets has increased by 50 to 70 percent, consumers have not felt it yet, but will see higher prices in the second half of the year,” he said.

The dairy co-op itself is also bearing higher costs, partly as a result of Brexit, which has prompted them to shift the transport of goods to the UK via Northern Ireland ports, while produce for the continent is now mostly transported via direct routes to French ports and avoiding the British land bridge.

Munster-based rival Dairygold, meanwhile, has reported record sales for 2021 and lower bank debt as it capitalizes on a decade of investing in the nutrition sector.

Headquartered in Mitchelstown, Co. Cork, the group’s turnover was 1.17 billion euros, up 15 per cent (152 million euros) from 2020, the cooperative said in its financial results on Wednesday. It is the highest turnover ever recorded.

Operating profit for 2021 was €30.4m, €4.4m more than 2020, with earnings before interest, taxes, depreciation and amortization (EBITDA) of €57.6m, an increase of €3.8m. € compared to 2020.

Dairygold reduced its bank debt by €11 million to €108.2 million last year, with a net asset value of €422.2 million at the end of 2021, an increase of €34.5 million from 2020.

The results reflect “a robust performance” across the business, with sales rising despite the pandemic, Dairygold said in a statement on Wednesday.

Chief Executive Officer Conor Galvin said the company was “in good financial and operational position.”

“After a decade of significant capital investments, the company has a strong EBITDA, manageable debt and a successful member funding model. Our focus has shifted from milk expansion to creating more value per liter of milk.”

Lakeland Dairies sales increased last year by 20 percent to 1.3 billion euros in the four business areas Food Ingredients, Foodservice, Consumer Foods and Agribusiness.

This gave the Cavan-headquartered cross-border cooperative an operating profit of €28.2 million and a €4.9 million increase in EBITDA (earnings before interest, taxes, depreciation and amortization) to €55.4 million.

Lakeland Dairies ended the year with shareholder assets of €230.9 million.

Dairygold collected and processed 1.49 billion liters of milk in 2021, a 4.2 percent increase over 2020.

Lakeland Dairies collected 2 billion liters of milk from 3,200 farming families in 16 counties in Northern Ireland and the Republic of Ireland.

https://www.independent.ie/business/irish/food-inflation-warning-as-dairies-say-farmers-face-sky-rocketing-costs-due-to-ukraine-war-41549970.html Food inflation warning as dairies say farmers face ‘sky high’ costs due to Ukraine war

Fry Electronics Team

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