Irish Dairy Board says brighter times will follow tough year

Dairy farming is facing a very difficult year, but the medium to long-term prospects are positive, according to the Irish Dairy Board chairman Aaron Forde.
Irish Dairy Board says brighter times will follow tough year

He told a meeting of the Joint Oireachtas Committee on Agriculture there had been record global milk output growth through 2014 of about 5.5%, driving high stocks, particularly in whole milk powder and cheese.

Slowing demand from Russia and China, two of the globe’s top dairy import markets, had weakened sentiment and prices. But milk output continued its momentum into 2015.

Mr Forde said milk prices in the EU and Ireland do not reflect where markets are at for several reasons. The global dairy trade auction run by Fonterra from New Zealand today would return a price for Irish milk in cent per litre terms of just over 20c. Milk prices in Ireland are about 30c.

Spot milk, if one is unlucky and does not have a customer or contract for it in the EU, is 24 to 25 cent.

Mr Forde, who is chief executive of Aurivo Co-op, said milk output in Ireland and through much of the EU continues to be quite strong as prices to farmers are not yet at those spot levels — the global dairy trade levels. He said the IDB and others have a market strategy which has allowed them to deliver better returns to farmers than the spot market.

Mr Forde said current market sentiment is not in a good place, although it has improved somewhat since year end. He said that milk prices in the mid-to-high 30 cent per litre range are not sustainable long-term for two reasons.

First, they drive milk supply around the world to excessive levels. When milk supply gets ahead of global demand, a downward pressure on prices is seen.

Second, he said, they constrain demand growth in that they become affordability issues for consumers in many international markets.

Mr Forde predicted that the market will remain weak until milk supply puts the brakes on and is constrained and, or, there is an uplift in demand following a Russian return to the market or improved demand from China.

“There are some signs of stability coming into the market place, albeit at very low levels and small levels of trade,” he said, adding that in the medium to long-term, “we are still very positive on dairying”.

Mr Forde, noting the continuing increase in world population, said the emerging market economies where IDB has had a very strong focus over the last number of years, including the continent of Africa, Russia, and China, will deliver growth.

The growth will not be in Ireland or Europe. It will be in the emerging market economies. “As diets in these economies become more westernised and people incorporate more protein, we expect good demand and growth for dairy,” he said.

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