Milk production set to increase by 300m litres in 2019

Co-ops gear up for more expansion as global trade prices rise

Gerald Quain, ICMSA
Declan O'Brien

Declan O'Brien

The massive surge in milk production over the last decade looks set to continue into 2019, with all the main processors predicting continued supply growth.

Industry sources forecast that milk supply expansion will increase by 300 million litres in 2019 and take overall production to more than 7.8 billion litres.

Milk supplies in 2018 are expected to top 7.5 billion litres on the back of a surge in deliveries during the back end of the year.

This means Ireland will realise its Food Harvest 2020 target two years early by growing overall milk production by more than 50pc since 2010.

Much of the dairy growth over the last decade has been in the east and south of the country, and further growth in this region is forecast.

Glanbia expects its suppliers to deliver 5pc more milk in 2019, or an additional 120 million litres. The country's largest milk processor has seen deliveries grow by 82pc between 2009 and 2018, increasing from 1.3 billion litres to 2.37 billion litres.

During the same period, milk supplies to Dairygold have grown from 855 million litres to 1.34 billion litres or almost 60pc. Production at the co-op is forecast to grow by a further 11pc over the next two years, rising to 1.49 billion litres.

Kerry Group has enjoyed supply growth of 9pc since milk quotas were abolished in 2015. Overall supplies increased 3pc to 1.2 billion litres in 2018, and the processor's milk pool is forecast to grow by a further 2pc in 2019.

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Lakeland Dairies recorded supply growth of 5pc in 2018, and is forecasting a further 5pc expansion in its milk pool this year. This will take its overall supply to 1.3 billion litres.

Meanwhile, the first Global Dairy Trade (GDT) of the year has seen prices rise - the third lift in succession.

The latest auction saw the price index rise by 2.8pc. Increased prices for skimmed milk powder (SMP) and butter milk powder drove the lift; the trade was helped by a 20pc drop in the volume of product offered. SMP prices were up 7.9pc, butter milk powder was up 9.3pc, while butter and cheddar prices were up 3.9pc and 3.2pc respectively. Just over 28,600t of product was sold.

The rise came on the back of strong November production in New Zealand. The previous two auctions in December also saw prices rise after months of negative demand.

Last month, Fonterra revised downwards its forecast milk price. Chairman John Monaghan said this was due to the global milk supply ­remaining stronger relative to demand.

However, Gerald Quain of the ICMSA said the recent GDT increases, along with improved demand for EU intervention stocks of SMP and stronger Dutch dairy quotations, signalled a positive turn in the market and offered scope for processors to hold milk prices.

"The strong [SMP] sales out of intervention are, we think, very significant for dairy markets. The stock overhang of SMP has been massively reduced, with over 270,000 tonnes sold in 2018," he said. Mr Quain called on processors to hold milk prices at least for the first quarter of 2019 and then review the market in light of supply and demand developments.

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