"Find a new home for a billion litres of milk"

“Find a new home for a billion litres of milk”

BBB was established a year ago in large measure because we were so critical of the quality of media analysis and commentary on the issue. An honourable exception from day one was Tony Connelly, RTE Europe Editor. Now he has written a book – “Brexit & Ireland” – and we are happy to recommend it just on the basis of the extract which appeared in the Irish Times Weekend Review last Saturday.

In the extract Tony homed in on the dairy industry, which is far and away the most exposed sector given the integrated cross-border supply system on which it relies. Here is what the exports to the UK looked like in 2016:

  • milk and cream tonnes – 72,222
  • milk powder tonnes – 25,764
  • whey tonnes – 21,772
  • butter fat tonnes – 61,995 of which actual butter 40,688.

As talks drew to a close in Brussels this week there was absolutely no trace of progress, no likelihood of a deal in 2019, nowhere even for a two-year transition to go. Any rational business must plan for trading on WTO terms from April 2019, and that means tariffs averaging about 50% on dairy exports to the UK.

The most exposed bit of the most exposed sector is cheese, and particularly cheddar. We sent sent 125,669 tonnes of cheese to the UK last year of which 77,651 tonnes were cheddar – nearly two-thirds of all the cheddar Ireland produces. “If you’re dealing with a tariff of 50% you’re not really in business,” said Dan MacSweeney, CEO of the Carbery Group which produces Dubliner cheese. “The challenge for the cheese industry is to find a new home for a billion litres of milk.”

Much of the plant used to make cheddar is so specialised, it cannot be used for other products. And there is no other significant market for cheddar, the cheese of choice in these islands and just about nowhere else.

This will not be the only milk looking for a new home. Lacpatrick (we interviewed them back in January for the Frontline project) supplies milk powder from north and south used in baby formula which is exported under EU trade agreements. Beyond Brexit, the 800 million litres of milk flowing from north to south every year cannot be used for such exports until the UK has its own agreements with countries such as China and Nigeria. The Baileys plant in Mallusk, Co. Antrim gets cream from Glanbia in Virginia, Co. Cavan, some from milk which may already have come from Antrim. Disintegrating the north-south supply chain will leave massive plant investments redundant.

We may have to buy Tony’s book.