Abolition of milk quotas will lead to creation of 10,000 jobs

The quota system was of its time, but in a more globalised market has generally run contrary to our best interests. All that is about to change, writes Agriculture Minister Simon Coveney

Abolition of milk quotas will lead to creation of 10,000 jobs

AFTER much discussion at EU level and extensive preparation by stakeholders, we are finally on the cusp of one of the biggest changes in the history of Irish agriculture.

The clock has counted down to quota abolition and with it will come the freedom to realise the full potential of the dairy sector in terms of output, export earnings, rural employment and investment, both indigenous and inward.

This quota system was a creature of its time, but in a more globalised market has generally run contrary to Ireland’s best interests.

It has constrained a sector which is globally competitive, and capable of cost-effective expansion.

Things are about to change, however, and for the first time in over 30 years Irish farmers will be free to produce milk in response to increasing global demand.

This will result in at least 10,000 jobs across rural Ireland in the next five years.

Over that time, Ireland will be the world’s fastest-growing dairy producer, with some 50% growth envisaged by 2020.

This growth proposition is based on the strong foundation, of a competitive advantage conferred by a natural, grass-based production system, on a strong international reputation for high standards of quality and food safety, and on the kind of global demographics that mean demand for dairy and other food products will increase significantly in line with increasing population and affluence.

At processing level, examples of infrastructural investment of scale and technical innovation now punctuate rural Ireland’s landscape.

These engines of future growth represent the footprint of major players who are investing in Ireland in the build-up to quota abolition:

  • The Glanbia project in Belview, involving an investment of €235m, is the largest indigenous infrastructure investment by an Irish company in 80 years.
  • Danone announced a €50m doubling of capacity in its infant-formula manufacturing plant in Macroom, Co Cork, in 2010.
  • Kerry Foods has built a global innovation centre — involving the creation of 900 jobs — in Naas, Co Kildare.
  • Dairygold is investing €120m in a phased project to incrementally expand its production capacity.
  • Lakeland Dairies has recently began a €36m investment in an expansion of its milk-powder processing operations at Bailieborough, Co Cavan.
  • €25m Dairy Processing Technology Centre (DPTC) supported by Enterprise Ireland and the dairy industry partners, which will be hosted by University of Limerick.
  • €10m investment by Teagasc and the dairy industry shareholders in the expansion of the Moorepark Technology Ltd pilot plant facility in Fermoy, Cork.
  • €5m milk powder processing plant at North Cork Co-operative Creameries in Kanturk.

Technology and product development is also central to the Irish dairy story, with West Cork co-operative Carbery developing a global footprint and a world-class reputation for innovation in flavourings, ingredients, and functional foods.

Companies of this calibre simply don’t commit to programmes of investment on such a massive scale unless they have confidence in the sector and in its stakeholders.

There has been significant investment at farm level too, and a €4bn Rural Development programme will help to bridge the infrastructural gap at farm level.

In a report produced in January by Dr Declan O’Connor and Dr Michael Keane, that examined the likely economic benefits and infrastructural requirements arising from planned dairy expansion in Cork, the authors estimate the 50% expansion in milk output will generate 4,000 jobs in Cork by 2020.

The report’s conclusion was that these would be long-term sustainable jobs with the prospect of further steady employment growth in the decade beyond 2020.

In Cork alone, it has been estimated growth in milk production will result in increased economic output of close to €450m a year by 2020.

Reflecting a broadening of the dairy sector’s export base, 40% of Irish dairy trade is destined for international markets, worth approximately €1.24bn in 2014.

Last year, Irish dairy exports to Saudi Arabia were broadly comparable to those to the United States. Dairy exports to China were valued at approximately €400m.

Such examples simply serve to highlight some of the new and exciting frontiers for the Irish dairy sector.

China has been witness to a tenfold growth in 10 years and the market is now the second-most valuable export market for dairy, compared to 13th in 2008.

Highlighting the opportunity, of course, is not to diminish the challenges ahead, and all of the players have a role to play ensuring those challenges do not undermine the development of the sector.

It is critically important that farmers, processors and Government remain united in their commitment to the vision for the sector, and that the pressures of expansion do not result in any reduction in the quality or safety of what we produce, the environmental sustainability of our production and processing systems, or the health and welfare of our animals.

Price volatility is also a key challenge for the dairy sector, and in particular for farmers.

Tools such as fixed-price contracts, futures markets, improvements in efficiency at farm and processor level and innovation and product development will all have a role to play in mitigating its impacts.

Economic recovery is not just about jobs in urban Ireland. It is very much about balancing the opportunities for our rural economy with those of our towns and cities.

The positive developments in the agri-food sector are proof of the extraordinary potential across rural Ireland, if we harness it with an ambition for the future, with the commitment of farmers and processors, and with the right policy and government-support framework.

The abolition of milk quotas is a very positive development and has the potential to transform rural economies over the next decade.

Simon Coveney is the Minister for Agriculture, Food and the Marine.

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