2019 at a glance
We will remember 2019 as a very significant milestone in the continuing development of our cheese business with works commencing on the €78m cheese investment project at Ballineen. This expansion is due for commissioning in 2020 and excitingly opens the route for product and market diversification opportunities in the years ahead.
Similarly, 2019 saw our Taste division Synergy continuing to build for future growth with both an investment in our main manufacturing facility in Chicago as well as an investment in a new commercial / technical centre in Indonesia.
Overall while 2019 was a less challenging year weather wise compared to 2018 for our shareholder suppliers, it was a little more challenging with regard to the returns from some of our main dairy markets. However, I am pleased to say that in order to help offset the impact of weaker markets on milk pricing, the Board of Carbery took the decision again to support milk prices for suppliers over the course of 2019.
Overall the weather in 2019, including a very early Spring, was favourable for milk production during the year which was
a blessing compared to the challenging weather events of 2018.
Although global and EU milk output expanded at modest rates of 0.1% and 0.5% respectively, Ireland’s output grew at a greater rate of circa 7%. Milk supply to Carbery from our shareholder suppliers grew by 6% in 2019, with record milk volumes being processed at Ballineen during the peak season.
The challenges of Brexit continued to rumble on over the course of the year with continually changing perspectives and predictions adding to uncertainty especially around the UK market, which is our main market for cheddar.
Although greater political certainty exists in some regards, it is almost certain that uncertainty relating to the implications of Brexit will remain for a while yet. However, current concerns around the impact of Covid-19 have, for now, overshadowed the potential implications of Brexit in 2020.
In global market terms overall supply/demand fundamentals remained reasonably in balance for 2019. However against this overall backdrop some dairy commodity markets, notably butter and cheese, were on a negative trajectory from early spring onwards due to a variety of factors.
Butter which has been the shining star of more recent years saw prices decline by as much as 20% over the course of 2019. Global supply (and as a result global stocks) of butter increased, causing reduced demand from buyers. For now it seems that butter pricing might remain in a lower and tighter range than seen over the past few years.
Now that EU stocks have been unwound, skim milk powder (SMP) looks to be better positioned from a market return point of view. Prices of SMP improved during 2019 from a very low and weak 2018 base. Cheddar, which is a significant product for Carbery, experienced market price falls of 6% on average in 2019. Brexit fears drove aggressive selling by some producers and this together with signs of increased stocks in the UK resulted in weaker sentiment amongst buyers.
Other factors, including the global economy, trade negotiations, and the associated risk of tariffs, like those seen between the US and EU, had an impact in 2019 and remain issues with the ability to affect returns for our products from international markets.
As noted earlier poorer market returns resulted in reduced milk pricing over the course of 2019. The Board of Carbery took the decision to support milk prices over the course of 2019 with a view to lessening the impact of lower milk prices for our shareholder suppliers. We provided this support through a combination of Carbery bearing extra costs during the year plus support paid from the stability fund.
Investment in product and market diversification
To help the Carbery Ireland Dairy & Nutrition business become more flexible and better able to withstand market shocks, the investment in product and market diversification kicked off in earnest during 2019 with major construction work taking place in Ballineen. When fully operational, this expansion will allow Carbery to tap into exciting new diverse markets, adding value to our ever increasing milk supply from the finest farmers in the world, on the lush, green pastures of West Cork. This will help create a more sustainable future for suppliers but also have an eye on the next generation of milk producers who will be the backbone of our communities in West Cork.
Our Taste business Synergy continues to broaden its global footprint with the opening of a commercial / technical facility in Jakarta, Indonesia. 2019 also saw the completion of a major expansion of the Synergy USA headquarters based in Wauconda, Illinois. Synergy now operates from nine locations globally covering the UK, mainland Europe, Asia and the Americas.
Safety & wellbeing
As a farmer I am acutely aware of the pressures involved in modern farming. Farmer wellbeing is the most important element of a successful dairy industry, because the primary producer is key to the success of Carbery and the wider community. We all have difficult days especially during busy Springtime periods when the weather is poor or perhaps for no obvious reason at all. Covid-19 is an additional factor adding stress to farming life this year. It’s at these times we need to look out for ourselves and each other as a healthy body and mind are what makes us resilient. Take care of yourself and try to farm safely as second chances may not come when dealing with animals or machinery.
Quality & sustainability
Sustainable dairy production is a top priority for Carbery. Being a co-operative with a collaborative mindset, Carbery has already come a long way and this is further demonstrated by the integration of our sustainability report this year within our annual report. I believe our sustainability report shows how we are well positioned to continue our contribution in making West Cork dairy production even more sustainable. As a global food company, food safety is critical to Carbery. It is identified as a key element of our business by internal as well as external stakeholders. We are dedicated to ensuring that our products are safe to consume and we work across our entire value chain to ensure that the highest standards are upheld.
Board and global team
I would like to thank my fellow board members for their dedication and time during the year as we continue to build on the strategic decisions which have made Carbery Group a diverse international food company. Thanks also to the management, staff, shareholders, milk producers and everyone involved in another successful year.
Carbery Annual Report 2019