No trickle-down dairy effect despite record €3bn exports
Last year, the value of Irish dairy exports increased 15%, reaching €3bn for the first time.
It was one of the best years yet for making butter, cheese, and milk powder and sending it around the world.
However, pasteurise the milk, put it in a carton, and sell it to our own consumers, and we are struggling.
Just over quarter of that market has been lost to product imported from the North (despite sterling being 20% stronger than the euro), and our dairy farmers and milk processors are asking themselves why bother, when manufactured dairy commodities for the export market are such a better business.
It’s a question raised every year by the National Milk Agency, in keeping with its role to ensure an indigenous year-round supply of milk for liquid consumption.
It looks like the two milk industries cannot survive side-by-side, and there are no prices for guessing which is under pressure.
The price a farmer sells milk at is almost completely based on the monthly prices for manufacturing milk derived from our €3bn export markets.
In the €513m per year fresh milk market (retail value), there is intense price competition between retailers, which continues to exert strong downward pressure on returns to milk processors.
We are the second best milk drinkers in the EU, averaging one third of a litre per day, which makes milk an ideal “loss leader” for retailers (selling a product at an apparently unprofitable price, mainly in order to get shoppers through the doors). A shop that does not sell milk at €1.49 for two litres loses customers. However, dairy companies making this cheap milk have to buy it at nearly the same price as milk that goes to a lucrative €3bn export market. That’s why the National Milk Agency sees some hope for the future of fresh milk in the Competition and Consumer Protection Bill, published last March by Enterprise Minister Richard Bruton.
The agency welcomes the bill, which should strengthen the bargaining power of suppliers in the grocery supply chain, even though it will not ban below-cost selling practices which are damaging to all stakeholders in the fresh milk supply chain.
