Farm Ireland

Monday 18 December 2017

Milk suppliers to invest €2bn at farm level

Last week we reported on the investment proposals for Dairygold's expansion post-2015. The outline of Glanbia's plan has also become available over the last few weeks.

The investment by the two processors could top €400m by the time both are processing the additional 60pc of milk that is expected to come on stream over the next eight years.

This is a serious level of investment on the part of the country's two major milk processors. And this comes on top of increased spending by other dairies in processing expansion, either by way of the purchase of additional capacity or investment in existing plants.

However, the scale of this investment on the part of the country's dairies could be dwarfed by that being made by farmers.

Up to €50m is already being earmarked for investment by Dairygold suppliers in the co-op's expansion plan and a similar sum is likely to be sought by Glanbia from its suppliers.

However, the amounts being spent on infrastructure and stock at farm level will be far greater again.

In our feature on milking machines this week, Padraig French, of Teagasc, predicts that dairy farmer investment over the next few years will exceed €1bn and could be as high as €2bn. The investment in milking facilities alone will be between €350m and €1bn.

This investment is already gathering pace, with milking machine installers reporting a surge in sales as farmers look to tool up for expansion.

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There are few other sectors in the economy that can match this level of spend, or is likely to over the next few years. That farmers are sticking to their guns and remaining on course to grow cow numbers significantly, which shows their confidence in the future profitability of dairying, especially given that margins have been decimated this year.

Their confidence would appear to be supported by a report from the OECD and the UN's Food and Agriculture Organisation, which predicts that international commodity prices will remain high for the foreseeable future.

The outlook predicts that annual agricultural output growth will slow to 1.7pc, down from a 2pc average in recent decades.

Meanwhile, the latest Department of Agriculture figures show that 2,275 applications have been received under the Dairy Equipment Scheme since its introduction. Around 2,000 approvals have issued to farmers, allowing them to begin work.

However, companies selling dairy equipment insist that this is too slow and that the Department approval speed is holding up vital on-farm work.

Just 272 farmers have completed their work so far, so there is a massive amount of work left uncompleted. Department spending on the scheme so far has been €1.2m.

Indo Farming