“Dairy consumption growth has been well ahead of dairy production growth, and so we have had the strongest prices we have ever seen for dairy products for the last two years. That price is weakening now,” said Mr Coveney in last week’s Oireachtas committee on agriculture, food, and the marine.
“We have two very good years for grain production, and there is a direct correlation between cheap grain and milk prices weakening, which is exactly what is happening at the moment.
“Grain has been relatively cheap globally for two years, milk production has increased as a result, especially in the United States, and so the price of milk is coming under pressure.”
He said there is more of a challenge for Ireland when grain is cheap, but Ireland is very well placed over the next five to 10 years to produce more milk and to get a good return from that milk.
“Ironically, in some ways the weakening of dairy prices forces dairy farmers to ensure that their business plan is robust.
“I have said to all the banks, and they say they are listening, that they should insist on business plans on the basis of 30c a litre, and no more. Some are looking for plans based on 28c a litre.”
”If milk has a higher price than that, which I hope it will have, then all the better, but that should be the basis for the business plan.”
“Our plans for expansion will, in my view, be realised,” said the minister, adding that it is very different from the beef industry, where there is a view that price seems to weaken above 30,000 animals a week.
Instead, dairy prices in Ireland are almost entirely determined by the international price of traded dairy product.
“If Ireland doubles its output, we will still be a significantly smaller producer than the US state of Wisconsin, which produces 12bn litres of milk per year.”
He predicted that an extra 3,000 people will be milking cows in Ireland within five years. “If we are going to have about 300,000 more cows in our herd between now and 2020, which is an increase of approximately 25% to 30%, we will get the other 25% growth from increased yield in cows.
“As a rule of thumb, it takes about one person to milk 100 cows. That is a conservative figure, so it may take more in many family farm situations.”