The board exports 60% of Ireland’s dairy produce to over 100 markets around the world, with about 14,000 of Ireland’s 18,000 dairy farmers depending directly or indirectly on the board’s returns.
“We had a record year in 2014 for product price. Product purchases and exports were up 16%, some 41,000 tonnes, IDB chairman Aaron Forde told the Oireachtas Committee on Agriculture, Food and Marine.
He predicted a very difficult 2015 for Irish farmers.
He explained that milk prices lag dairy product prices by about three months because of contractual situations. “As such, farmers have yet to see the full impact of even contracts done in the second half of 2014.”
However, the Dairy Board’s contracts and strong brands such as Kerrygold are generating high returns. In contrast, if the board sold all its products on the Global Dairy Trade auction, it would be returning only 20 cent per litre to farms.
“Today, milk prices in Ireland are approximately 30 cent. Spot milk, if one is unlucky and does not have a customer or contract for it in the EU, is 24 to 25 cent.”
He said that in late 2014, Chinese demand dropped to very low levels, and Russia banned imports, taking two of the top five dairy importers in the world out of the market.
“Our prediction is that the market will remain weak until milk supply puts the brakes on and is constrained and, or, there is an uplift in demand. There are some signs of stability coming into the market place, albeit at very low levels and small levels of trade.
“We are one of the lower cost production regions in Ireland because of our grass and comparative advantage in producing milk from it. Where costs are higher, milk production will be choked off before it gets to very low levels.”
“We see a stabilisation occurring later in the year and a return to sustainable levels for both the farmer and the consumer. In the long term, our outlook is positive.”