Analysis: Has the dairy sector turned a corner on poor prices?
Dairy farmers have been hit by poor prices since the middle of last year, but recent market movements indicate that an upturn is taking place
When milk quotas were being removed from Europe, there was elation among the dairy sector. Quotas had been introduced in the early 1980s and were considered a stranglehold on the sector. For years, any dairy farmer looking to expand their business was forced to buy quota, which was a costly affair due to its limited availability.
Despite this, the Irish dairy sector has for years been the most profitable sector in Irish farming and the ending of milk quotas heralded a new dawn, one that was lauded by many as an era of 'white gold' as the demand for a western diet that includes dairy continued worldwide. However, when on April 1,2015 came and quotas were officially abolished all was not quite as expected on the western front.
Milk prices reached record highs in 2014 in response to increased demand from Asia for dairy in the preceding years and the dairy sector was riding the crest of a white wave.
Irish dairy farmers were gearing up for the first opportunity in 30-odd years to take the brakes off production, but so too had other European farmers.
The volume of milk produced in Ireland after quotas increased by 18.5pc, although as a country we only account for 4pc of European milk production, and by just over 2pc across Europe as a whole.
However, the predicted continued growth in demand from Asia for dairy produce didn't materialise as China's economy shuddered and consumer confidence among the growing numbers of middle class parents was hit. While the demand for the considered better quality, non-Asian infant formula was still strong the growth predicted wasn't at the strength predicted.
Further, a political row between Europe and Russia hit dairy farmers in Europe as Russia stopped importing food, including dairy, in response to economic sanctions over Crimea and Ukraine.