The Irish Dairy Board has warned that global market conditions across all dairy products have weakened considerably and are expected to have a serious impact on its performance this year.
The IDB's CEO, Noel Coakley, said that the first six months of 2008 has seen intense pressure on market returns as global demand declined from the previous year's record levels.
People's reaction to higher prices, coupled with more recent adverse economic conditions, have led to a slowdown in sales affecting many international dairy players. The recent strength of the euro versus both the dollar and sterling is also impacting on returns.
He said he expects the second part of the year will yield an improvement in the board's financial performance, but he warns that this will not be enough to avoid a significant reduction in its operating surplus.
He points out that in Germany - one of the IDB's biggest markets - recessionary concerns are growing, resulting in a contraction of the retail butter market and a marked shift in sales to own label brands.
Mr Coakley stressed that the Irish Dairy Board's underlying performance is robust in spite of the current tough conditions and that the fundamentals of the dairy industry remains sound.
However, he adds that it will be 2009 before any substantial recovery in profitability is seen.
The dairy industry is worth over €2 billion annually, and despite a fall in numbers there are still about 20,000 dairy farmers in the country.
The Irish Dairy Board owns the Kerrygold brand, which is the Irish dairy industry's most important marketing asset. The IDB exports some 80% of its members' cheese, 70% of butter and 50% of all skim and whole milk powder.
