New models for ‘milk pricing and managing market volatility needed’

Ireland’s dairy sector may have to look at new models for milk pricing and for managing global market volatility, say milk industry experts.

Irish and visiting speakers at yesterday’s ‘Managing Price Volatility in the Irish Dairy Sector’ conference in Cork Institute of Technology agreed that farmers were sporadically being placed under severe income pressure by the dislocation between the long dairy farm production cycle — sometimes up to 18 months — and the eventual cash return from dairy products.

In this context, Agriculture Minister Simon Coveney said the days of relying on CAP and other European interventionist market measures was a thing of the past. Farmers, he said, are likely to be required to become more and more independently funded in the years ahead. In terms of managing volatility, this will mean that dairy farmers who want milk price stability will have to sign up to price hedging mechanisms offered by private sector financial institutions.

CIT lecturer Dr Declan O’Connor said: “The Department of Agriculture has made it clear that we can no longer rely on the tools that existed in the past.

“In future, EU market support tools will only be used purely for crisis management. There is an education deficit about the markets. These markets need to be supported or they will wither and die.

“Another big issue is the long production cycle in dairy, the relationship between the farmer’s initial cost inputs and the dairy product making its way onto a consumer’s plate. It can take up to 18 months for the farm product to be turned into cash. We will also have to look at another way to manage the milk price.”

Other speakers at yesterday’s conference included Professor Andrew Novakovic of Cornell University, US; Charlie Hyland of US financier FC Stone; David Zaslavsky of Mead Johnson Nutrition; Teagasc director Professor Gerry Boyle, and Teagasc analysts Dr Kevin Hanrahan and Trevor Donnellan.

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