Conor Mulvihill: Is dairy heading for choppy waters?

White gold: Ireland is currently seen as a tiger economy in the global dairy industry
White gold: Ireland is currently seen as a tiger economy in the global dairy industry

Conor Mulvihill

Ireland is currently seen as a tiger economy in the global dairy industry, with one of the fastest growth rates on the planet. Since the lifting of the quota regime the industry has flourished, jumping from producing just over five billion litres of milk in 2015 to surpassing eight billion litres today.

The scale of this growth, allied with the quality of the output from grass-fed systems, have meant that Ireland's traditional primary processors like Dairygold, Kerry, Glanbia and Lakeland have been joined here by huge multinational specialised nutrition manufacturers like Abbott, Danone and Wyeth/Nestle.

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The dairy industry in 2019 will deliver over €2.6 billion in milk payments alone into parishes around Ireland and is the driver of investment in farms and factories 'outside the toll roads' on the island.

But with all this positivity and our reliance on export markets for well over 90pc of our products, we must be fully aware of both threats and opportunities emerging where Irish dairy and specialised nutrition is sold.

Brexit

Despite the fatigue that has set in on the matter, a botched Brexit remains a clear and present danger to the prosperity of our industry.

In the event of no deal, we will see the globe's second biggest dairy importer emerge off our shoreline, with none of the frictionless trading relationship afforded to us by the single market available.

Worse again, the All-Ireland dairy economy, painstakingly developed over decades will be fractured. This will shred delicate supply chains and economic prosperity for farmers and companies across the island.

In terms of product, Irish cheddar is the poster boy for the problems faced. Over two billion litres of Irish milk is used to make almost 200,000 tons of Irish cheddar.

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The 65 million strong British consumer market is the location of choice for the bulk of these exports and there remain few other locations on the globe, not to mind on our doorstep, that have such an appetite for this product. While the industry over the past three years has moved quickly to diversify away to other types of cheeses, the rapid growth in our milk pool means that it is new milk that will be supplying these Mozzarella and Jarlsberg factories.

With the chaos in Westminster, Dairy Industry Ireland (DII) continues to strive at home, in London and Brussels to develop solutions to keep as much of the status quo as possible for our processors and their farmers.

Global Trade Tensions

The fundamentals for dairy demand globally remain very strong. Rising global populations will continue to crave nutritious Irish grass-fed dairy products over the coming decades. But this should not make us complacent.

Global trade always flourishes on a clear rules-based system and current tensions between the three main global trading blocs - the EU, the USA and China - point to the possibility of rocky waters.

Ireland has much to lose, with phenomenal success of the Kerrygold brand in the USA adding to huge strides made in Irish dairy derived commodities and specialised nutrition products in the Chinese market.

Trade wars deliver little bar disruption and market loss and we are working to inject some calm rationality to smooth relationships for the benefit of all parties.

The appointment of Phil Hogan as the EU's trade commissioner is a welcome development in this matter.

Recent issues have emerged in other key markets for Irish dairy, such as a palm oil dispute in Indonesia and a foreign currency restriction law in Nigeria, which threaten to undermine Irish dairy export progress into these rapidly developing areas.

DII is working with the Irish government and the EU to address the problems appearing, but the current uncertainty confirms the fickleness of global trade, and the potential impact of a political problem on the other side of the world on the Irish farmer. Should we become complacent, the sudden Russian ban of 2014 taught us some painful lessons of the impact of trade wars on milk price and farm incomes.

Macro Trends

Three macro trends have emerged that present challenges to Irish dairy. For us, these are the developments around the sustainability of dairy, the nutritional story of dairy, and finally the animal welfare story of the Irish dairy industry.

The industry and farmers are looking to meet the opportunities and the challenges presented by these trends head on, and deliver science-based, metric-driven improvements on these issues from farm to fork.

Dairy Industry Ireland is also teaming up with Bord Bia, the ICMSA, the IFA, Meat Industry Ireland and the NDC to form an initiative called 'Meat & Dairy Facts' to tell our story and explain the vital role of meat and dairy in a balanced diet and to demonstrate why exactly Irish meat and dairy ranks among the world's best in terms of quality, sustainability and animal care.

Conor Mulvihill is Director of Dairy Industry Ireland

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