A top global agri-banker predicts that continued strong growth in world demand will absorb additional supply of EU dairy products after milk quotas are fully lifted in 2015.
Kevin Bellamy, senior global dairy analyst for Rabobank, with more than 25 years of experience in the sector, said that when quotas go an additional nine billion litres of milk will be produced annually.
“Of this additional production, it is estimated that 3.6bn litres will be absorbed by additional demand out of the EU,” he said.
Mr Bellamy said the role of quotas in suppressing EU milk production had been over-stated.
“Quotas are not currently a constraint in most EU regions, with many areas producing below the quota amounts anyway, due to other limiting factors.” These included limited availability of farmland, high cost of finance, environmental restrictions, . and retail price wars which have lowered the price of milk.
The top banker’s upbeat forecast can help the Irish dairy industry find the investment needed for its bid to increase milk production by 50% up to 2020. It is estimated that €400m will be needed for extra equipment in Irish creameries. Dairy farmers say even bigger investment is needed on farms — estimated at €1bn by IFA national dairy committee chairman Kevin Kiersey. He has said farmers need constructive co-operation from banks
“What we will see though is dairying moving from the less-efficient production regions in the south and east of Europe to the north and west, where production will increase if price incentives remain high enough.”
He listed the countries and regions with the most potential to increase their dairy supply as including Denmark, western France, the UK, Ireland, the Netherlands and northern Germany.
Mr Bellamy said the cost of producing milk in Europe should reduce, as supply moves from less favourable areas, and expanding farms achieve economy of scale.
Mr Bellamy was addressing New Zealand dairy producers and exporters, and said they have little to fear from extra EU milk, because little of the extra EU exports will go to New Zealand’s main export markets of South East Asia and China.
Picture: IFA national dairy committee chairman, Kevin Kiersey.
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