Farm Ireland
Independent.ie

Sunday 19 November 2017

‘Irish dairy farmers fortunate that the outcome of 2016 was not worse’

Martin Ryan

Irish dairy farmers have maintained or increased their competitiveness since the abolition of milk quotas eighteen months ago, Teagasc's Pat Dillon of Moorepark Research Centre told over 300 dairy farmers at the Teagasc National Dairy Conference at the Rochestown Park Hotel, Cork today.

Mr Dillon  said that production costs have been reduced on Irish farms as a result of the greater output, but further significant gains "are still to be obtained in grass utilisation on dairy farms" which will deliver significant financial benefits to producers.

"The large increase in milk production in Ireland forecasted with the abolition of milk quotas has materialised. This has been associated with an increase in herd size as well as an increase in milk yields per cow" he said.

"In the first year after milk production abolition milk production increased by almost 19% in Ireland while the increase in the EU 28 was 4.2%, in USA 2.4% but deceased by 1.5% in New Zealand", he added.

Pictured are a section of the attendance at the Teagasc National Dairy Conference on ‘Technologies for Success’ in Rochestown, Cork. Photo O'Gorman Photography.
Pictured are a section of the attendance at the Teagasc National Dairy Conference on ‘Technologies for Success’ in Rochestown, Cork. Photo O'Gorman Photography.

He pointed out that the corresponding increase in demand over the period had been lower than predicted due to the lower than expected demand from China, low oil prices and Russia remaining largely out of the market.

"This provided the perfect storm in terms of global dairy commodity prices with milk prices bottoming out in June 2016, before significant correction to the supply-demand imbalance in the second half", he said.

He stressed that "minimising costs should be an important objective" and if Ireland is to secure a greater share of the world market in the future "the competitiveness of the sector will be crucial".

"In the future dairy farmers will be required to develop systems of milk production capable of delivering sustainable returns within a volatile milk price scenario.  In Ireland this will be best achieved through the development of low cost grass base systems of milk production", he said.

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Pictured at the Teagasc National Dairy Conference on ‘Technologies for Success’ in Rochestown, Cork are speakers Professor Gerry Boyle, Director Teagasc, Anne & Pete Morgan, New Zealand & Anne Marie Butler, Ulster Bank. Photo O'Gorman Photography.
Pictured at the Teagasc National Dairy Conference on ‘Technologies for Success’ in Rochestown, Cork are speakers Professor Gerry Boyle, Director Teagasc, Anne & Pete Morgan, New Zealand & Anne Marie Butler, Ulster Bank. Photo O'Gorman Photography.

He said that direct costs/cents-litre had dropped from 16.2 in 2013 to 12.7 last year and fixed costs were down from 11.3 to 9.7.

Latest data shows that Irish farmers had the lowest cash costs as percentage of output in the EU at 77% compared to France at 83%, Netherlands 92% Germany 99% and Denmark 120%. 

However the Irish advantage deteriorated when imputed costs were taken into consideration with the economic benefit of a grass based Irish system reduced by the imputed charge for owned land and labour.

"It could be said that whilst milk prices and margins ave been relatively depressed in Ireland over the last 24 months, it must be recognised that dairy farmers in Ireland were fortunate that the outcome was not worse. 

“Weather and exchange rate movements were favourable. This meant that the reduction in profitability at farm level was a lot less than potentially possible based on market conditions" he concluded.

Online Editors