Milk prices to fall due to significant rise in output: IDB
Published 05/12/2012 | 06:00
Milk prices will fall during the initial post-quota years due to the volumes of extra milk being predicted by the EU's largest milk processors.
This was the stark message from the Irish Dairy Board's (IDB) chief, Kevin Lane, who addressed farmers at the ICMSA's AGM in Limerick last week.
He said that the IDB expects Irish milk output to increase by 15-17pc during 2015, and to see see annual increases of 5-7pc up to 2020.
However, this significant rise in volume will be dwarfed by the increased volumes of milk expected to come on stream from some of the EU's biggest dairy processors.
Mr Lane said he had discussed projected milk volumes with the CEOs of Arla and Friesland Campina, who, combined, process almost four times Ireland's entire milk output.
Arla expects to increase milk volumes by 10pc by 2020, while Freisland Campina expect to process an extra 20pc.
"It's hard to see how we're not going to have a problem when these volumes come on stream," Mr Lane admitted to the AGM.
"So I'd share the minister's ( Simon Coveney, Minister for Agriculture) concerns for milk prices in the years following quota," he said.
However, Mr Lane refused to be drawn on predicting how big a drop in price these extra volumes would see.
While increases in global demand are keeping pace with world milk output, huge increases in key milk producing regions are other areas of concern, according to Mr Lane.
He pointed to a 17pc increase in milk output in New Zealand over the last two years, while the world's biggest dairy producer, India, has seen volumes increase by 6pc so far in 2012.
Mr Lane also told ICMSA members that there was no doubt in his mind that he would get higher prices if dairy co-ops agreed to sell more of their milk volumes through the IDB.
He also claimed that efforts to curb retailer power were an "awful waste of time."
"Retailers are getting more powerful all the time but no legislation will solve this," he said. "There are three ways to survive with any big retailer. You need to be super-efficient, strong brands that they want to have on their shelves, and have very capable people on your team that know when to say no and know when to say yes."
The IDB's consumer foods manager, Joe O'Flynn, defended the basket of goods index system that the IDB reports back to its co-op members.
"If we announce that we are dropping the milk price we are paying our members, it's on the wires in hours and then our customers in Germany or wherever are beating up our sales guys wondering why their prices aren't dropping too," said Mr O'Flynn. "So the index protects us commercially and is the fairest way for us to report what is actually happening."
The IDB expects domestic production of whole milk powders to double during this decade. Butter production is projected to increase by 63pc, with cheese output rising by 40pc. "We're concentrating on products that are affordable in places like Africa, where the strongest increase in demand is expected," said Mr Lane.