Surplus milk production direct cause of sector woes, say dairy chiefs

TWO dairy industry leaders have now identified surplus milk production as the root cause of difficulties in the industry in the EU.

Dr Noel Cawley, who will retire from his job as Irish Dairy Board managing director next week, has predicted a difficult two to three years for dairy farmers, but says if the surplus of milk in Europe is reduced, prices should improve again.

And Britain’s dairy farmers, the worst paid in the EU-15, have been told by the chief executive of Arla Foods that they should cut milk production by one billion litres a year.

The European Commission is aiming to get milk prices down to a level where it would not be viable for many farmers to produce milk, said Dr Cawley.

He predicted that Ireland will lose 13,000 dairy farmers over the next six to seven years, leaving just 10,000 in 2010, benefiting from Ireland’s lower, grass-based milk production costs.

Tim Smith, head of the British subsidiary of the Danish-Swedish Arla co-op, said too much milk is being produced in Britain for the market: “I would have no problem if production fell by one billion litres, but farmers must make that choice themselves”.

British farmers say their average 27c per litre milk price barely covers production costs, and this was the reason for British production in the year ended March 31 being under quota for the first time in a decade.

Here, IFA National Dairy Committee chairman Richard Kennedy told Glanbia milk suppliers their latest price cut will cost them €3,500 on average, leaving their income at 19,000, or less if increased costs are factored in.

“This is 60% of the average industrial wage, and 40% of the average wage of co-op workers. It is simply unsustainable,” said Mr Kennedy.

He warned no dairy farmer could provide his family with a viable income at these prices, never mind make the obligatory on-farm investments which the Nitrates Directive and cross-compliance will require.

“Investments to grow the scale of production, which Glanbia has presented as the solution to farmers’ income crisis, are simply impossible to finance on such a low income,” he said.