Dairy farms will need price shock insulation
In the latest edition of the Moorepark News report on research, technology and innovation for the dairy industry, he says global demand for dairy produce is growing at a rate of 2.5% per annum. This is fuelled by increasing demand from more affluent consumers in key developing markets in Asia and Africa.
The economic benefits of a growing dairy sector are already evident. Dairy product and ingredient exports grew by an estimated 15% to exceed €3 billion for the first time in 2013.
As the economic footprint of the dairy sector is predominantly rural, a growing dairy industry will stimulate increased economic activity in rural areas, points out Mr Dillon.
However, he says a number of new challenges exist for Irish dairy farmers.
In recent years, milk prices have become much more turbulent because of the tight supply-demand conditions on global markets.
During the last decade, the variation in annual milk price has increased fourfold (from plus or minus 2 cents/litre to plus or minus 8c).
The requirement for increased farm investment within a volatile milk price environment poses challenges. Strict control of farm costs will become even more important, and will necessitate development of more resilient farming systems.
Mr Dillon says key components of the dairy farm system post-quota must include high-EBI genetics, a compact calving pattern, and greater production and utilisation of grass per hectare.
“The farm business needs to be technically and financially efficient, generate surplus cash, consistently achieve financial expectations and be simple to operate.”
“In Ireland, resilient dairy farm systems must have a low cost-base, to insulate the business from price shocks, and allow family farms to generate sufficient funds in times of higher milk price to meet family commitments and finance expansion.”
