Milk producers warned against over-investing in systems which market prices won't support
Milk producers have been warned against investing in "Rolls-Royce" dairy systems that volatile world market milk prices could not justify.
Former IFA president, Tom Clinton, said it cost three times as much to establish a dairy farm in Ireland as in the US, and suggested farmers should not invest more than €3,000 per cow in dairy expansion.
Mr Clinton, who runs extensive dairy operations in Ireland and New Zealand, said volatility on world markets meant low milk prices would have to be expected at least once in every three years.
He told farmers at a Limerick IFA dairy meeting in Adare that there was only one market for milk -- the world market -- and warned prices would not recover while world production was increasing at 4pc and consumption growing by a total of 2.5pc.
Mr Clinton said it would take a significant weather disaster to allow the restoration of the supply and demand balance in the short term.
He said that Irish dairy products could be competitive at a milk price of 28c/l, but prices of above 30c/l would lead to increased production and price pressure.
Mr Clinton said that mergers and amalgamations in dairy processing had failed spectacularly to deliver real benefits to Irish milk producers.
However, he said the main players in the Irish dairy sector were being well run.
"For the first time in my lifetime the majors in the industry are well managed within themselves. None of them are in financial trouble.
"You could not criticise them but in fact compliment most of the management. But still we are 3c/l or 9pc behind the [Friesland] Campinos of this world," Mr Clinton warned.
The former IFA leader said the failure of Irish co-ops to attract more young milk suppliers on to co-op boards was also a worrying trend.
"Co-ops are not doing enough to get more of the young people involved. It urgently needs to be addressed," he said.
He claimed the introduction of milk quotas in 1984 had created a "straightjacket" on expansion and had undermined the competitiveness of the Irish dairy sector.
"The gospel was that quotas were the greatest thing ever, and as president of the IFA I had to say that, but I could see what was happening.
"To be blunt about it, we made ourselves dependent on subsidies and left ourselves years behind."
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