Dairygold, the dairy processor headquartered in Cork, experienced a notable decrease in revenue and profit during 2023 due to factors such as a reduction in milk production, flagging global demand, and the continual stresses of an inflationary crisis. The firm, in revealing its latest yearly outcomes, emphasised the importance of maintaining Ireland’s existing dispensation relative to the EU’s nitrates directive for the survival of both farmers and processors.
As the third biggest milk processor in the State, Dairygold reported a 15% slump in turnover, amounting to €1.4 billion, a drop of €254.7 million when compared to 2022. This decrease was said to be a reflection of the marked reduction of the previous year’s market returns.
With a drop of 40% to €23.9 million, the firm’s operating profit also saw a significant decrease. The corporation said that the deflated results were partially due to board members electing to offer higher milk and grain prices to suppliers in an attempt to lessen the consequences at the farming level. Dairygold’s cited average milk price for 2023 was down 16.5 cents from the previous year, at 38.4 cents per litre.
The dairy market faced challenging conditions worldwide after a prosperous 2022, mainly due to a diminished demand from China prompted by a weakening economy and the country’s aim for increased dairy independence. Inflationary pressures also affected consumer spending, leading to an adverse impact on sales volumes.
Dairygold’s interim CEO Michael Harte described 2023 as a challenging year for both the dairy and tillage industries with market returns falling drastically after reaching record highs in 2022. He pointed to the mix of unfavourable weather conditions and high costs of input and processing as contributing factors to the industries’ difficulties.
Dairygold disclosed that it processed 1.41 billion litres of milk in the past year, a decline of 4.7% (70 million litres) compared to the previous year, securing its position as the third largest dairy processor. Over 40% of its product was cheese, and it exports approximately 90,000 tonnes of dairy products via export organisation Ornua.
There was also a decline in turnover to €795 million, a €239 million drop compared to the previous year within the company’s most significant division, Dairy Ireland. The slump mainly reflected the decrease in market returns, and also a drop in the milk supply.
Dairygold emphasised that the future quantities of milk will be significantly influenced by the dairy industry’s response to sustainability challenges, prioritising this issue as crucial. The retention of the present nitrates derogation, capped at 220kg organic nitrogen per hectare, is fundamentally important to Irish dairy farming, insisted Mr. Harte. This derogation is subject to review at the end of next year.
The nation of Ireland is among three European Union (EU) member states granted a special exception to permit certain farmers to work with elevated nitrate levels. However, this allowance is feeling the strain due to declining water quality, a consequence of the dairy industry’s substantial growth following European Union milk quota abolition in 2015.
Mr Harte stressed that if the nitrogen limit were to decrease to 170kg, a restriction applied across the entire EU, future dairy production would be significantly affected. This, in turn, would implicate farmer and processor viability and have severe repercussions for the rural economy as a whole.