THE ISSUE: Waiting for subsidy to kick in
MORE THAN 50 YEARS AGO, before Barbados became an independent nation, the island formally established a dairy industry. That was when the Barbados Dairy Industries Limited, better known as Pine Hill Dairy (PHD), started operations.
Since then, milk consumption and milk production became important features of Barbadian life. However, the sector has faced, and continues to confront, various challenges. Other Caribbean dairy producers have faced challenges of their own in an environment where there is competition from international producers that have deeper pockets.
PHD started out as a joint venture but eventually changed hands when it was purchased by Banks Holdings Limited, which remains its owner. What is the current state of play for the sector from PHD’s point of view?
In its financial statements for the nine months ended May 31, 2016, the dairy reported that revenues increased by $3 million when compared to the same period in 2015. Growth coupled with sustained efficiency improvements and lower energy costs resulted in a pre-tax profit of $6.2 million. The performance was “aided by warmer and drier climatic conditions locally”.
In terms of the 2015, performance, PHD management said it “showed improvement as compared to 2014 but fell short of expectations”.
“Focus on the export business aided performance as actual volumes in 2015 more than offset the decline in domestic volumes. However, total revenue for the dairy category fell short of expectations, primarily as a result of disappointing sales of single serve flavoured milks and evaporated milk, the latter being impacted by the residual effect of a product recall in the latter part of the previous financial year,” the company added.
In recent years, the dairy and the farmers who supply it with milk have been challenged financially. After repeatedly lobbying Government for support, last year Minister of Finance Chris Sinckler announced assistance was coming.
However, that help was delayed. The measures announced included that there would be a new tax on milk, a five per cent rate for milk products containing 60 per cent or more of liquid fresh cow’s milk and a ten per cent for all other milks and milk substitutes.
Government would pay a subsidy to farmers and a national board would be reconstituted. The measures were welcomed by the PHD and farmers but until now have not been implemented.
In April, Sinckler was reported as saying the programme would start soon and recently there was a major signal that progress was being made. This was when 194 cows from Pennsylvania, United States were imported.
Barbados Beef and Dairy Producers Association president Brian Allan said the Barbados Agricultural Society (BAS) purchased the animals to help access the dairy subsidy Sinckler announced. Allan said he expected that milk prices would subsequently decrease.
Before the cows arrived, BAS chief executive officer James Paul had explained that the demand for milk was expected to rise later in the year, at a time when production was expected to be down, leaving dairy farmers with little choice but to import cows.
This development has come at a time of a reported slump in the global dairy market. The Fonterra Co-operative Group, the world’s biggest dairy exporter, said it expected continued volatility in the global market.
“Current global milk prices remain at unrealistically low levels,” its CEO Theo Spierings said.