THE outlook for world dairy markets is picking up but the Irish dairy sector is continuing to struggle.
Probably 75% of dairy farmers are working for nothing given they are getting 20 cent a litre for their milk while the IFA reckons 27c a litre is a breakeven figure for the bulk of its members. The sector here is still in turmoil and farmer anger is palpable.
The official organ of the farming community has said it is deeply concerned for the sector.
The IFA is also concerned and has commissioned a prospectus report to come up with some fresh thinking. IFA president Padraig Walshe said the imminent report will make a positive case for the role of agriculture in the economy, a role which has never been questioned.
Mr Walshe said it will also point to the need for the restructuring of the dairy sector. How many times have we heard that before?
It’s hard to know how the sector will get its cost base right. At the moment, farmers would need to be able to produce milk at about 16c a litre to make a basic living off the land. On that point the IFA says they would currently need to get 27c a litre for their milk to break even. That’s a pretty big gap.
Farmers could not realistically be expected to make up all of that deficit and presumably the dairy processors too would have to play their part by being more efficient.
Report after report from the ICOS and elsewhere have all highlighted the need for rationalisation. Everyone knows what must happen but nobody seems prepared to do it.
There are good local reasons for this resistance. Communities who have had dairy co-ops are loathe to see them go. This is a long tradition and there was a time when the Irish farmer was the backbone of this economy.
Then along came the EU. Ireland sold its fishing rights down the drain to gain better support for agriculture and it can be argued that it in effect made the sector soft.
Why bother with being efficient or more competitive when the various schemes, from intervention to export credits, supported an inefficient production in agriculture right across Europe and not just in Ireland.
Bloxham Stockbrokers, whose food analyst Joe Gill has not spared the dairy industry in the past, says it’s do or die for the dairy sector. It is broken and to fix it, industry-wide and “radical rationalisation” is required.
That must be “wedded to low-cost milk production”, which seems to be a point missed by the IFA in its analysis.
In five years, a milking herd of 120 cows will be needed if farmers are to have any chance of staying in the game. The other crucial point in what Mr Gill had to say was the Government will have to be the agent for change.
“If it does not act, farming and processing will fall into financial crisis with adverse consequences for on and off-farm economic activity and employment,” Mr Gill warned.
For groups like Glanbia and Kerry, dairy processing will undermine earnings and cost them money in capital investment that may generate poor returns.
That in time could create tensions for both groups who might be forced to decide if they wanted to be manacled to a dairy sector in Ireland that cannot make up its mind about how to face the future.
“Strong leadership is needed, and quickly,” Mr Gill concluded, but if the IFA on one side and the processors on the other all adopt a stance to protect their various self interests it is hard to see how this radical change the IFA is now calling for is going to come about. He says a ‘green milk’ response is needed.
Its mandate should be to process dairy commodities in Ireland in a “highly efficient, safe and environmentally friendly manner, creating a network of large plants that exploit the nation’s comparative advantage in producing milk.”
But is anybody listening?
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