Swings and roundabouts for our dairy farmers
Food and Drink Industry Ireland (FDII), which represents the food processors, highlights the many challenges facing the sector in the years ahead suggesting the end of the world is nigh.
But the FDII quickly adds in its 2007 annual report that if successfully addressed then the future looks pretty optimistic.
This sector produced €18 billion worth of food and drink last year, accounted for 230,000 jobs and €8.6bn in exports.
Those figures underscore the fact that the food and drink industry is this country’s most important indigenous sector.
But back to the challenges ahead.
They include rising commodity prices which, according to The Economist Price Index rose by 55.3% last year.
That’s pretty steep with the sharp rises due to bad weather and rising demand, largely attributable to the better living standards emerging in China and India and in other Asian economies.
As a result of the boom in Asia dairy products have become very popular, resulting in a bright outlook for Irish dairy farmers in the future.
That good fortune was reflected in the sharp rise in operating profits at Dairygold last year to over €21 million, better than anything the dairy co-op has produced in recent years as it cut costs and reconfigured itself to meet the new challenges emerging in global markets.
Chief executive Jerry Henchy said last week he believes the model now in place assures farmers of a good living in the years ahead.
Just as the FDII observed, however, Henchy made it clear that the demand and price curves will not always point upwards.
By isolating the dairy operations into an autonomous business,separate to the consumer, property and retail operations, Henchy’s ambition is to deliver key dairy ingredients to the global markets and quality feed inputs at reasonable prices to farmer shareholders in the years ahead, to ensure they can have a decent living out of milk production.
In an interview last week Henchy made it clear farmers can enjoy a good living out of dairying, but they will have to take certain steps to ensure that success.
He contends dairy farmers can boost milk output by 40% as the quota system disappears. The expiry date is 2015, but it could happen earlier than that.
But when it does dairy farmers will have to switch their focus exclusively to milk production.
That will require a radical shift from previous farming ways. It will mean farmers shunt off their calves to be reared elsewhere and devote their land exclusively to producing milk.
By going that route it is Henchy’s view that most of his suppliers can improve output by up to 40% and ensure a decent living standard in a more open market when quotas will be consigned to history.
However, as the global food story unfolds the opportunity presented to one side of the food chain seem to be to the disadvantage of another.
So while dairy farmers are doing good, farmers involved in pig and beef production are suffering from higher input costs as grain prices soar.
And at the end of the food production chain consumers are staring dearer food prices in the face.
Food inflation last year was 6.6% well above the ordinary inflation rate signalling change times for consumers.
But as we struggle for solutions Irish dairy farmers can look forward to a better future, a prospect few would have thought likely even two or three years ago.
