A no-deal Brexit and WTO tariffs could spell disaster for the Irish dairy brand

Dairygold, Ireland’s largest farmer-owned co-op, has made a bleak prediction about its UK cheese supply in relation to Brexit.

Read More: A Brexit crash looks all the more likely

The Irish Times reports that Dairygold, the largest Irish cheddar cheese exporter to the UK outside of industry body Ornua, exports about 30,000 tons of cheese to UK markets each year accounting for about one-fifth of the Irish company's total dairy sales.

However, if a hard Brexit proceeds and the World Trade Organization’s (WTO) tariffs come into play between Ireland and the UK, Dairygold expects a dramatic impact on their cheese trade.

“This would knock us out of the UK market,” said Jim Woulfe, chief executive of Dairygold.

“The impact would be devastating,” Woulfe said, noting that a no-deal Brexit and WTO tariffs would place an additional  €50 million ($56 million) in costs for the Co Cork-based company, which, if borne by the consumer, would result in a 50 percent price hike in the UK.

“We’d have to diversify quickly,” Woulfe said. “So we’d start shifting product from what is currently a cheese and whey stream into a milk powder stream.”

Read More: Grocery shopping could be classed as smuggling for border families in no-deal Brexit

Speaking with Agriland, Woulfe said: “Brexit is certainly a challenge that is overshadowing the market.”

“And in our case, because cheese is an important part of our portfolio – 40% of our milk goes into cheese – so the cheese sentiment will influence our position.”

“So, directly or indirectly, Brexit will have consequences in how that plays out for us. But, at the same time, what we’d have to say is relative stability is the order of the day.”

Read More: WATCH: Kerrygold highlights Irish dairy farmers in heartwarming ad campaign

Responding to Ornua’s dip in Purchase Price Index on Tuesday, Woulfe said: “We observe that clearly – but we’ve to look at our own basket of products and what we’re doing and how it looks forward.”

“So, nothing sensational here, in anticipating a relatively stable few months ahead; that’s the prediction – of course, all subject to board review on a monthly basis.”

Despite the looming threat of Brexit, Ireland’s dairy industry is experiencing its largest boom in the history of the country, partly in thanks to a sizeable jump in dairy demand globally as well as the lifting of restrictive EU milk quotas in 2015.

As such, Dairygold reported on Tuesday that their annual turnover rose to a record €992.9 million in 2018 from €965.5 million in 2017.

Dairygold prepares for Brexit

In a statement released on Wednesday, Dairygold said: “Ireland needs a Brexit deal that is as similar as possible to the existing trade arrangements within the EU.”

“Even if a comprehensive Free Trade Agreement is negotiated and agreed, it will not be comparable to EU Single Market membership due to additional administration burdens, health, and veterinary certification, customs procedures, transport and logistics delays, supply chain adjustments, potential regulatory divergence, and competitor pressures.”

“No level of planning could insulate any EU organization, trading with or through the UK, against the implications and consequences of a hard or no deal Brexit.”

“That is why it is critical, no matter what the final outcome of the negotiations, that there is a sufficient transition period, to fully prepare for the future trading relationship between the EU and UK. Even then, the Dairy Industry will suffer serious consequences in the event significant tariffs applying.”