Mr. Aaron Forde:

Just dairy farmers. Senator Mary Ann O’Brien asked our views on Fonterra. Not all of them are for publication here. The Irish and New Zealand industries started at a point in our journey 30 years ago with similar output levels. We entered the quota system which put a regulatory cap on our output. Fonterra drove on and now processes 17 billion to 18 billion litres of milk in New Zealand and almost 20 billion litres in various other parts of the world while we are at 5.7 billion litres, which is similar to where we were when we entered the quota system. Fonterra has had major opportunities to grow. Structurally, it was very different in the past. There were three big dairy companies, which have since morphed into one. This mirrors a trend of consolidation in global dairy, including here in Ireland to some degree, albeit slower. Fonterra has significant scale in world dairy.

IDB is not small. We are the market facing arm of 60% of Ireland’s dairy, comprising 3.3 billion litres. We are significant and have good relationships with Fonterra. We regularly meet it and all the other significant dairy actors on the global stage. We collaborate with them by exploring projects in markets in which we might potentially have synergies, for example if another company has strengths and we are not so strong. A number of projects are ongoing with global players, which is healthy. When we were in a no-growth scenario from a volume point of view it made sense to do much of our business from an Irish base. Now that we are in a growth scenario we have packed 36 of the brightest and best we can out of Ireland, some of whom came from other dairy companies, including Fonterra. We have a team of very good people.

Fonterra is returning what the market delivers to it through the Global Dairy Trade, GDT, auction, and eight or nine months ago it had a view that the GDT was the best thing that ever happened to New Zealand dairy farmers. I am not sure that is its view today. An auction system which it runs for a large portion of its output it amplifies volatility on the way up, but also on the way down. Our strategy of investing in brands, markets, people and innovation delivers a much more stable income to dairy farmers over time.

The Chairman asked about the 40,000 tonnes of additional product. In 2013, IDB had more demand for dairy than supply, particularly butter, because of the good work being done in many of our growth markets. Thankfully, much of that 41,000 tonnes of extra product, an increase of 16%, has not posed any difficulty and we have been able to place it in markets and deliver returns in line with our EU peers in the industry.

IDB looks at acquisitions from one of two points of view, either as a route to market or as a route to value. A route to market would be a business in an overseas jurisdiction that can take Irish cheese, butter or milk powder and put it under a brand or has relationships with customers or facilities that can further process it and deliver tonnes of Irish dairy into the market. A route to value would be a business that can take some Irish dairy, not necessarily a lot, but has a good brand or customer relationship or it is in a market in which we want to grow that will deliver value in terms of profitability home to the parent for distribution back to the members.

I will give examples of four recent acquisitions. In 2013 we acquired a company in Saudi Arabia called Al Wazeen Trading. We are constructing a facility there to produce soft white cheese under patented technology developed with Teagasc and we are very excited about the prospects of the Saudi acquisition as a hub into the developing markets of the Middle East. In Spain we acquired a cheese business and established IDB Espana, which will deliver a good route to market for casein, cheese and powdered dairy ingredients. As a bolt-on to our dairy ingredient business in the UK, Adams Food Ingredients, we acquired a company called FoodTec, which will take us further up the value chain and deliver synergies to our ingredient business there. In the US, we acquired the remaining stake in Meadow Ingredients, a cheese ingredient business that is profitable in a growing market for IDB.

The issue of support measures was raised. We were thinking more in terms of trade agreements and Ms Randles will deal with it.