With TJ Flanagan-ICOS

1. Agri food Innovation
An ICOS Dairy Perspective
TJ Flanagan
June 2014
IrishCo-operativeOrganisationSociety(ICOS)
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2. ICOS Represents over130 co-operativebusinesses and
organisations in Ireland
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3. • Irish Agri Co-ops were the innovation and the innovators of
the late 19th and the 20th century.
• They were introduced to dairy from the 1890’s to bring
individuals together
• to address market failure
• to compete with other butter suppliers (Danes, Finns etc.)
• to facilitate the adoption of new technology. (De Laval Steam
Separator)
• The were introduced in livestock to break dealer cartels from
the 1950’s onwards.
• They are being used now in forestry marketing, in water
supply, in farm accounts, animal health, fishing…..
• We need to work hard to ensure that the model is still
relevant and innovative.
Co-ops..….innovators?
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4. • Co-ops continue to dominate primary dairy processing globally
• The model has shown the flexibility to facilitate growth
internationally; Fonterra, Friesland Campina, Arla.
• The model has facilitated preservation of local structures and
strengths; Valio and West Cork-Carbery.
• Evolution and “the Irish Model” has created a platform for
growth and value creation; Kerry and Glanbia.
• The typical Irish co-op is a-typical of co-ops internationally
• We have a multipurpose model; milk, agri trading, etc.
• Tiers of membership
• Creates challenges when we try to focus on a particular sector
Co-ops..….innovators?
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IrishCo-operativeOrganisationSociety(ICOS)

5. This is the real playing pitch….
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6. How well are we prepared for the post 2015
expansion?
• What are the building blocks we need?
• Are they in place?
• How can Innovation bridge the gaps?
At farm level?
At processor level?
At market level?
Dairy; the Road to 2020
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IrishCo-operativeOrganisationSociety(ICOS)

7. Farm level building blocks…………. Land Mobility
“In France, the average field
changes hands every 70 years
but in Ireland it does so every
400 years.”.. IFJ
• Taxation measures…no silver
bullet!
• Cultural/pride/fear issues with
older landowners
• Conacre system!!!
• Collaborative farming may be a
solution
• We need to devise new
structures to tempt these
landowners to make land
available.
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IrishCo-operativeOrganisationSociety(ICOS)

8. • Capital
• About €1 billion needed at farm level
• About 300k cows @ €3k per cow
• Banks have the money, but they’re cautious
• Farmers need to be cautious too
• Focus on costs and profitability
• Grass production
• Huge advances
• Ongoing developments
Farm level building blocks
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IrishCo-operativeOrganisationSociety(ICOS)

9. • Breeding and Genetics
• ICBF, EBI
• Animal Health
• AHI; Cellcheck, Johnes etc
• Sustainability
• An Bord Bia SDAS
Farm level building blocks
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IrishCo-operativeOrganisationSociety(ICOS)

10. • Processor, supplier relationships
• Clarity emerging
• New Milk Supply Relationship
• New and traditional Funding Arrangements
• Capacity
• In place; Bailieborough, Ballyragget, Bellview, Carbery,
Charleville, Kanturk, Listowel, Mallow, Mitchelstown,
Nenagh, Shannonside, Tipperary, Virginia…
• Move to higher value added; enriched
powders and Infant Formula ingredients
Processor level building blocks
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IrishCo-operativeOrganisationSociety(ICOS)

11. • Routes to Market
• IDB and Processor-Customer Relationships
• Customers are looking for our product
• We’re now on the global dairy supply radar
• Clear message on our offering
• Health
• Sustainability
• Global Demand Growth
• Underlying growth of 2-2.5%
• Supply-demand mismatches periodically
Market level building blocks
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12. Milk vs Product price Volatility
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13. Farmers survived 2008/2009 market crash but
were not heavily borrowed!
We are about to see €1bn invested at farm
level to facilitate expansion, much of it
borrowed?
Can farmers survive milk prices in the “late
twenties or early thirties”? (Kevin Lane, IDB)
Volatility will be the big issue
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IrishCo-operativeOrganisationSociety(ICOS)

14. Processor/Marketer
• Get/stay close to your customer
• Invest in Innovation
• Look at tools to lock in price; back-to-back contracts,
futures.
Government/EU
• Facilitate taxation measures to allow farmers to
manage cash flow volatility
• Retain/utilise existing market support measures
Farmer
• Be prudent in borrowing for expansion
• Innovate for efficiency
• Consider all options re fixing prices/hedging
What can we do on Volatility?
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IrishCo-operativeOrganisationSociety(ICOS)

15. The outlook is positive for dairy in Ireland
• Farmers are ready, but they need land!
• Market fundamentals are positive, but we need
help with volatility
We are efficient producers, but at 39c/litre….so is
everyone else.
In Summary
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