Only one way to secure fresh milk supply, says IFA
Many farmers will be pushed by pure economics to streamline their system and abandon their liquid milk contractual commitments, warned IFA President Eddie Downey last week.
He was speaking at the launch of IFA’s Liquid Milk Handbook, which provides advice at a crucial time for liquid milk producers — the first winter when they can expand production of non-liquid milk.
“We want people to realise that they cannot take the consistent availability of high-quality, fresh, locally- produced milk for granted,” said IFA Liquid Milk Chairman Teddy Cashman at the launch.
Ireland’s National Milk Agency regulates the liquid business, because market forces cannot always be relied on to deliver consistent, fresh, quality supplies all year round.
But IFA fears that if milk is commoditised and utilised exclusively as a loss leader and driver of footfall in supermarkets, driving down its value, and replacing it with cheaper but potentially unreliable imports or UHT milk, milk consumers will be the losers.
Mr Cashman says industry stakeholders must work together to provide farmers with a framework, a clear roadmap which shows them that there is a future in remaining committed to liquid milk, even in the context of export-oriented dairy expansion.
“This is the only way we can secure locally produced, high quality fresh milk supplies for Irish consumers for the long term.”
Liquid milk is the most important domestic retail market for Irish milk at €530m, equivalent to just under 20% of dairy exports.
“Producing milk for a daily liquid milk contract requires farmers to calve a sufficient number of their cows in autumn. This creates significant additional feed and labour costs and a multitude of system complexities,” said Mr Cashman.
“While the contracted volume is of sufficient critical mass relative to the rest of the milk produced, and while the contracted litres are sufficiently well remunerated by a strong winter premium, farmers may well decide to expand the non-liquid part of their production without questioning their continued commitment to liquid milk.”
“With static to decreasing individual liquid milk contract volumes, we are seeing this year the type of conditions that would easily push farmers to focus on creamery milk to minimise costs and streamline their system. to allow the business more flexibility in dealing with milk price-feed cost volatility. Once that decision is made, there is no turning back.”
Extended production into the autumn by spring milk producers, while theoretically more possible now that quotas have ended, is inadequate because it is unreliable.
Low milk prices and/or poor autumn weather affecting grass growth would affect availability.
While there is an established import path from Northern Ireland, large-scale reliance on imports is also unsatisfactory.
Fresh liquid milk cannot be transported economically across very long distances, and currency and availability considerations will challenge the viability and consistency of imported supplies.
Replacing fresh milk with long-life UHT milk would go against Irish consumer preferences.
It is clear that, in the post-quota expansion of Ireland’s export production, market forces will militate to push specialist producers towards more profitable, seasonal systems.
A number of milk purchasers, who are trying to extend supplies over the shoulder months to improve processing capacity utilisation, operate winter schemes in which farmers who are calving a limited number of cows in autumn, or simply stretch their lactation, receive premiums for milk supplied over the winter.
In the case of extended lactation, this will occur when milk prices are high and/or conditions good, and farmers seek to capitalise on this to increase income or cash flow, but it cannot be relied upon where profitability is challenged, because it requires costly additional feeding, or where conditions are unsuitable. Therefore, it does not contribute to a reliable availability of fresh, quality milk.
Winter milk from freshly calved cows, on the other hand, is what the drinking milk market needs to be able to rely upon during the winter. Ideally, a winter scheme should provide sufficient returns to farmers to allow for critical mass in terms of numbers of cows calved to service it.
To quote Dr Joe Patton [Teagasc Liquid Milk Specialist], “It is important to highlight that peak milk management and winter milk supply should be viewed as related, but separate issues in terms of future milk pricing and contract structures.
Milk processors need to very clearly define their objectives if imposing price mechanisms that influence suppliers to deviate from the most profitable supply curve at farm level”.
