Conor Ryan, the chief executive of Arrabawn Co-Operative Society in Nenagh, has said the speed at which the dairy industry is changing from being protected to almost a free market has been very difficult.

The problems facing the 50 million gallon co-op were the same as those facing big operators like Kerry, he said - cuts in intervention supports, high energy and transport costs and fierce competition from global players.

The society, which was formed in April 2001 with the merger of Nenagh Co-operative and Midwest Farmers Co-operative, manufactures dairy products, food ingredients and feed compounds. It has 13 agri-stores and a liquid milk plant in Kilconnell, Co Galway.

Mr Ryan said the society was made up of four business operations and all but one - milk processing - were performing well.

The cuts in casein support and the phasing out of butter intervention supports were creating major difficulties in the milk manufacturing area for the society, which has 1,200 milk suppliers and employs 200 people, half of them in manufacturing.

The changes had occurred over 18 months and this had proved difficult.

"We have to change our mindset but there are no magic solutions. I believe that change should be incremental and should be managed, especially as we have to export 80 per cent of the milk we produce here."

Mr Ryan, who chaired a session at the recent Teagasc National Dairy Conference, rejected a suggestion that one large processing plant should handle all of Ireland's milk. Many processors were already co-operating in areas where they could cut unit costs and too many people were "talking the business down".

The cost of land, he said, was another major issue in his area.