A REVIEW had been launched into the future operation of Isle of Man Creamery.
An external consultant has been brought in to help directors at the privately-owned farmers’ co-operative identify ways of cutting costs and making the plant more efficient.
Their aim is to provide better returns and a more sustainable future for the Creamery’s shareholders - the island’s 37 dairy farmers who are facing unprecedented high costs of production.
Environment, Food and Agriculture Minister Phil Gawne MHK says he believes a significant restructuring of the plant is required.
He said: ‘The government is committed to ensuring we have a fresh milk supply in the Isle of Man and the only way of ensuring that is by having a central creamery capable of producing fresh milk.
‘There is no doubt the price of milk in the island is now quite high and there is a concern that some consumers may turn to cheaper less reliable imported milk,
‘We are in close discussions with the Creamery at the moment about its future. We are hoping the Creamery will engage now in some significant restructuring of operations down there.’
Isle of Man Creamery’s plant opened in the mid-90s and currently employs 88 staff.
But its profitability has been squeezed by spiralling costs and falling production in the island’s dairy farming sector – a situation reflected across the British Isles.
Last year’s weather – the second wettest on record - and the impact of cheap imported milk have compounded its problems.
The number of dairy farmers in the island has more than halved in the last 10 years.
Milk production at the Creamery, which was built to produce 50 million litres of milk annually, has fallen from a peak of 40 million to an expected 22 million litres this year.
Output dropped by 10 per cent last year due to the wet weather.
The plant also produced 1,600 tonnes of cheese last year – a situation unusual in the British Isles where packed milk and dairy food production is usually carried out in separate factories.
But the main issue facing the Creamery is that the milk price paid to dairy farmers has not risen as much as the cost of milk production.
Dairy farmers are paid a base price of 28p a litre by the Creamery for the milk they produce, although it averaged 29p last month – but say they need about 30p a litre just to cover their costs.
In a statement, the Creamery’s managing director Findlay Macleod said: ‘The Creamery is paying the highest price we have ever paid for milk but our farmers are facing the highest costs ever and even the silage from last year was poor due to the bad summer.
‘Cost of producing milk and the cost of investing in dairy production is outstripping the milk price that can currently be paid.
‘DEFA [the Department of Environment, Food and Agriculture] has assisted by re-opening the Farm and Horticultural Improvement Scheme (FHIS) for a short period.
‘Minister Gawne has indicated the willingness to provide some support for the dairy industry and discussions are ongoing. Falling milk production on the island makes it difficult to achieve the best efficiencies at the Creamery.
‘We are currently reviewing our business strategy to see how we can best deliver a sustainable price to the island’s farmers.’
Belinda Leach, general secretary of the Manx National Farmers’ Union, said: ‘There is no doubt that the Creamery has challenges in terms of its markets.
‘Use of milk as a loss leader in supermarkets has had a huge impact. They’re very lucky to have some terrific support from local consumers – that is a massive boost. But it doesn’t hide the fact that the Creamery still has to be competitive.
‘We would want to be in any partnership to ensure a secure future for dairy production in the Isle of Man.
‘We are very supportive of the strategy on food security and the importance of having a ready supply of fresh milk. But it has to be efficient.’