The Irish dairy industry could follow the example of New Zealand by restructuring over time to become a single entity, according to the managing director of the Irish Dairy Board (IDB), Dr Noel Cawley.

He also said yesterday that a certain amount of sharing of resources would be to the benefit of the industry which, he conceded, had seen little growth in 2001. However, he insisted that produce continued to sell well and at a premium price.

He said that €16 million (£12.6 million) was spent per annum promoting the Kerrygold brand for which there was a definite market, even in new locations like Poland.

Reviewing the industry's performance this year, which dipped because of the foot-and-mouth crisis and rallied later, he predicted that 2002 would not be so positive.

Prices for dairy products might come closer to EU intervention level, particularly in the first half of the year, he said.

Some sales of butter and skim milk powder into intervention could be expected in the first quarter; there was some evidence that calf milk replacer would improve from its low base in 2001 and a further expansion in EU cheese consumption could have a positive impact on the overall market balance.

The return to farmers from IDB sales would be in the region of 108p a gallon next year, he predicted.

The dominant feature within dairy markets this year was the decline in product prices from record levels in 2000, Dr Cawley said. Prices started on a downward trend and strengthened between April and September.

But a weakening of demand on international markets and a faltering world economy from the summer on led to a downturn in product prices which became more pronounced in the final quarter of the year.

Cheese production in the EU continued its positive growth in 2001, up 4 per cent on the previous year, and consumer demand increased, probably in response to the BSE and foot-and-mouth crises, leading to higher prices.

Skim milk output is expected to have been down 9 per cent, while butter production was down 1.2 per cent and whole milk powder back by 8 per cent.

The IDB has made an operating profit of £27.5 million (€35 million) and expects to pay a dividend of around £9 million to its stakeholders.