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Monday 5 December 2016

Northern milk ready to flow

Dairy output here will rise after 2015 but the North will already be awash with milk by then

Richard O'Halloran

Published 23/08/2011 | 05:00

The setting of targets is an integral part of the way every company works. Take, as a case in point, the objective set for the Irish milk sector within Food Harvest 2020. Once quotas have been removed, it is anticipated dairy output could rise by up to 50pc in the subsequent five years.

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The one, not insignificant, sticking point regarding the application of this theory is the fact that producers south of the border have the 'little' issue of quotas to deal with until the spring of 2015. Meanwhile, dairy farmers in Northern Ireland have been operating in an effective quota-free environment for the past five years. And with the UK unlikely ever to fill its quota allocation again, this state of affairs looks set to remain in place.

From a North versus South perspective, the issue of milk producers in one part of the island having a free hand to produce all the milk they wanted was of little consequence, until about 12 months ago. The past year, however, has seen Northern milk prices increase dramatically on the back of the world's strengthening commodity markets. At the present time, producer prices are touching 30p/l (34c/l) and the expectation is that returns could rise again during winter.

Northern milk producers are strange creatures when observed from a seasonal production perspective. They have no issue with calving all year round and are heavy meal feeders. Average feeding rates are in the region of 0.3kg of meal per litre of milk produced, resulting in the average autumn calving Holstein cow receiving 2t plus of concentrate during a single lactation.

Despite the recent hike in feed, fertiliser and fuel costs, dairy farmers in Northern Ireland are currently enjoying near record levels of profitability. More significantly, they believe that the recent rise in producer prices is not a flash in the pan. After all, the world's population is set to increase from the current level of 6bn people to 9bn by 2050 -- and all these extra mouths will have to be fed.

One needs only to look at the current breeding stock prices being paid in the North to verify the feel good factor that now exists within the dairy industry. Well-known auctioneer Michael Taaffe recently conducted a dairy farm dispersal sale in Co Armagh. The cows and heifers on offer were a mix of good commercial and pedigree animals. Anything coming into the ring with a bit of youth on its side and milk in its udder was bid up at £2,000 plus in the blink of an eye. And equivalent prices are being paid for good dairy stock in marts the length and breadth of Northern Ireland at the present time.

In fact, there are not enough locally bred cows and heifers coming on to the market north of the border. As a consequence, significant numbers of cattle are now being sought in Britain and the Netherlands. So, it's only a matter of time before raiding parties from Northern Ireland head south, if they haven't done so already.

For those dairy farmers not wanting to sell stock, but under real quota pressure at the present time, leasing cows to a counterpart in Northern Ireland could be an option. As one might imagine, things can get complicated in this regard. However, the Department of Agriculture in Belfast has confirmed that leasing is permissible under milk quota legislation, provided that the production actually takes place in Northern Ireland and the milk is sold to a purchaser registered for milk quota purposes in Northern Ireland. There is also scope for a cow to be domiciled in two separate member states at different stages of the same lactation.

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But let's not forget the big picture. Milk production in Northern Ireland has already increased by more than 50pc since 1985. This was facilitated by the importation of quota from Britain. Back in the day, Northern dairy farmers were paying up to £1 per litre to get their hands on additional quota. Today the same commodity comes with a 'zero' price tag.

The likelihood is that Northern Ireland may well be awash with extra milk by 2015. So consider this. A number of the co-ops in the Republic are already accessing the milk pool north of the border. There is also speculation that United Dairy Farmers will consider broadening the bidder base at its monthly milk auction during the period ahead. And if the Euro remains strong, what's to stop processors in the Republic getting a fair chunk of the additional milk they need in the run up to 2020 from Belfast.

Another advantage to be gained from looking North is the flatter milk output profile of the dairy industry in that part of the island. A less seasonal production pattern equates to a more efficient usage of stainless steel from a processing perspective.

Fonterra chairman Henry van der Heyden spoke at a recent dairy conference in Northern Ireland. He expressed the view that dairy farming the world over has a bright future. However, the challenge facing the dairy industry in Ireland is the fact that producers on one part of the island only are already out of the traps and heading for the white tape.

Richard O'Halloran is a freelance journalist from Northern Ireland

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