The Irish Dairy Board increased its turnover to a record £1,639 million (€2,081 million) which resulted in an operating surplus of £27.9 million last year, according to its annual report which was published yesterday. Describing 2000 as an "exceptional year for international dairy trade", the board's managing director, Dr Noel Cawley, said world market prices for all dairy products strengthened, with skim-milk powder prices reaching near-record levels.

Milk powder prices in particular, he said, were fuelled by strong demand from key Asian and South American markets.

In addition, the strength of the US dollar significantly improved the competitiveness of EU exporters, including the Irish dairy industry.

Dr Cawley said turnover had increased by 15 per cent, the operating surplus had risen to 10 per cent and pre-tax profits were up 14 per cent.

Members' funds, he said, at £191.1 million, were 9 per cent higher than in the previous year.

The board, according to Dr Cawley, had paid a cash bonus of €3.6 million to its members in December last. It also proposed to allocate a further €7.6 million of its surplus to the Annual Bonus Fund for future distribution to members.

Dr Cawley warned that the Irish dairy industry would have to consolidate if it were to have any chance of staying in the European markets which were now controlled by a small number of supermarket chains.

"In Belgium and Holland, for instance, there are only two major retail chains and if you are not in one you have to be in the other. There are too few buyers now and the big co-operatives on the continent have consolidated to meet this threat," he added.

He said that as far as Ireland was concerned, there were still a significant number of players attempting to sell products on an individual basis and in the long term this was not sustainable.

Kerrygold butter sales had held up well, he said, and the board's distribution network on the US west coast was working extremely well. However, the sales performance in non-EU markets was mixed.

He predicted that despite the outbreak of foot-and-mouth disease, which had created some uncertainty and a distortional effect on sales in the first half of this year, dairy markets were expected to be stable and firmer in the second half of the year.