Farm Ireland

Friday 23 February 2018

Cawley: Farmers must carry expansion costs

Darragh McCullough

Darragh McCullough

Farmers will be the ones picking up the tab for the expansion of the Irish dairy sector, claimed Teagasc chairman Noel Cawley at last week's National Dairy Conference.

More than 1,000 upbeat dairy farmers, gearing up for expansion after 30 years of operating within EU-imposed quotas, were given the stark reality at the conferences held over two days in Charleville and Mullingar.

Mr Cawley said he firmly believed the cost of flattening the supply curve would be prohibitive compared to savings secured by better use of existing processing facilities.

"It's clear that the competitive advantage of Irish dairying lies in maintaining a spring calving herd," he said.

The cost of increasing national output by 50pc, as outlined in the Food Harvest 2020 report, without altering the existing seasonal supply pattern will cost more than €850m, according to estimates by the Irish Dairy Board (IDB).

"Realistically, the Irish farmer is going to have to pay for some, if not all of the expansion required," said Mr Cawley.

"Where's the money going to come from otherwise? Not the Government, with the way things are going. The EU might do something for us but most of the money is going to come from farmers' profits from the extra milk they produce.

When questioned as to whether the processors should also contribute, the former IDB boss replied: "They're one and the same thing. What are the co-ops but extensions of the farm?"

Also Read

Mr Cawley also stated that it was unlikely all the extra milk would find a home in new products and markets as advocated by his fellow speaker, Rabobank analyst Marina Rebello.

"The scale of the extra volumes that we are talking about will be simply too great," he said.

Instead, he maintained that significant amounts of produce would go into existing commodity products such as powders, cheese and butter.

Ms Rebello had outlined to delegates the details of Rabobank's global outlook for the dairy sector.

She said the Dutch-based bank expects global demand to increase by 2.5pc in 2012-2014, driven mainly by increasing demand in China, India, southeast Asia, north Africa and the Middle East.

She pointed out that global demand continued to increase even in 2009, when every economic region suffered. With demand expected to outstrip supplies, dairy prices would hover somewhere above 2006 average levels, she predicted. This would translate into a long-term, farm-gate milk price average of somewhere between 29-30c/l inclusive of VAT.

Ms Rebello also highlighted that Ireland was one of the cheapest places in Europe to produce milk. The 20pc difference between Ireland and the next cheapest countries, Britain and Holland, was due to lower fixed costs.

"This allows Irish farmers to be more flexible," she said. "When the price crashed in 2008, a number of Danish farmers had to switch to three- times-a-day milking just to stay in business because of their high levels of fixed costs."

The conference also highlighted a new national programme to tackle mastitis on dairy farms.

Teagasc's Finola McCoy, who is heading up the initiative, said that the infection is costing individual farmers tens of thousands of euro every year.

The programme, called Cellcheck, hopes to bring together local vets, Teagasc staff, milking machine service providers and farmers.

Irish Independent