Sunday 18 February 2018

Got milk? Got output, export, earnings and employment

The Minister for Agriculture Simon Coveney outlines the opportunities - and challenges - that the abolition of milk quotas will bring

HERD: Minister for Agriculture Simon Coveney with dairy farmer Bobby Hovenden, Co Laois. Photo: Nick Bradshaw
HERD: Minister for Agriculture Simon Coveney with dairy farmer Bobby Hovenden, Co Laois. Photo: Nick Bradshaw

Simon Coveney

LAST week was momentous for Irish agriculture. For the first time in over 30 years, Irish farmers are free to produce milk in response to increasing global demand.

After much discussion at EU level and extensive preparation by stakeholders, the countdown clock reached zero and we have finally entered a quota-free environment for milk production.

With the quota regime now consigned to history, the freedom to realise the full potential of the dairy sector in terms of output, export earnings, rural employment and investment - both indigenous and inward - has arrived.

This sea-change will result in up to 15,000 jobs being created across rural Ireland. Over the next five years, Ireland will become the world's fastest growing dairy producer.

No other country is planning for over 15pc growth in 2015 and continued expansion and investment year on year up to 2020 - and beyond.

The quota system was a creature of its time, but became increasingly anachronistic in a more globalised market.

It certainly ran contrary to Ireland's best interests in recent years. It constrained a sector which is globally competitive, and capable of cost effective expansion.

Free from the shackles of a quota regime, Ireland's growth proposition in the dairy sector is based on the strong foundations of a competitive advantage conferred by a natural, grass-based production system.

We have a strong international reputation for high standards of quality and food safety, and the trends of global demographics mean the demand for dairy and other food products will increase significantly in line with increasing population and affluence.

At the processing level, examples of infrastructural investment of scale and technical innovation now punctuate rural Ireland's landscape.

These engines of future growth represent the footprint of major players who were and still are investing in Ireland in the build up to quota abolition.

The Glanbia project in Belview, involving an investment of €235m, is the largest indigenous infrastructure investment by an Irish company in 80 years.

Others have also shown their confidence in the sector. Danone announced a €50m doubling of capacity in its infant-formula manufacturing plant in Macroom in Co Cork in 2010.

Kerry Foods has built a global innovation centre - involving the creation of 900 jobs - in Naas, Co Kildare.

Dairygold is investing €120m in a phased project to incrementally expand its production capacity.

And Lakeland Dairies has recently began a €36m investment in an expansion of its milk-powder processing operations at Bailieborough, Co Cavan.

Companies of this calibre simply don't commit to programmes of investment on such a massive scale unless they have confidence in the sector and in its stakeholders.

There has been significant investment at farm level too, and a €4bn rural development programme will help to bridge the infrastructural gap at farm level.

Over 80pc of Irish dairy output is exported off the island and some 50pc of these exports go to markets outside the EU. Last year our dairy exports were worth over €3bn - and as an example of this global reach, Irish dairy exports in 2014 to Saudi Arabia were broadly comparable to those to the United States.

When we think of traditional trading partners, countries such as the United Arab Emirates, Mexico, Algeria, Vietnam, Kuwait and Jordan may not be the first to spring to mind - but these countries accounted for a combined total approaching €240m in dairy product exports during 2014.And of course dairy exports to China were valued at approximately €400m.

Such examples serve to highlight some of the new and exciting frontiers for the Irish dairy sector. China has been witness to a tenfold growth in 10 years, and the market is now the second-most valuable export market for dairy, compared to 13th in 2008.

Highlighting the opportunity of course is not to diminish the inevitable challenges which await us - and all of the participants have a role to play, ensuring those challenges do not undermine the development of the sector.

It is critically important that farmers, processors and Government remain united in their commitment and vision for the sector - and that the pressures of expansion do not result in any reduction in the quality or safety of what we produce, in the environmental sustainability of our production and processing systems, or in the health and welfare of our animals.

Price volatility is also a key challenge for the dairy sector over the next period - particularly for farmers.

Tools such as fixed price contracts, futures markets, improvements in efficiency at farm and processor level, and innovation and product development will all have a role to play in mitigating its impact.

Sustainability is also an issue of paramount importance. Irish agricultural production is independently and internationally recognised as one of the most climate- and resource-efficient systems in the world. The European Commission's Joint Research Centre has assessed Ireland's dairy production as that with the joint-lowest carbon-intensity in the EU.

In October last year, the European Council recognised the multiple objectives of the agriculture and land-use sector - with its climate change mitigation potential - and the need to ensure coherence between the EU's food security and climate change objectives. The council invited the commission to examine the best means of encouraging the sustainable intensification of food production, while optimising the sector's contribution to greenhouse gas mitigation and sequestration.

In the context of meeting the global climate change challenge, and against a background of increasing dairy demand, it cannot make sense to migrate dairy production from countries with highly carbon-efficient production systems, to those with carbon intensive systems.

Cohering an approach to the twin challenges of food security and climate ambition is not a simple proposition. However, these goals cannot be mutually exclusive, and food production in countries like Ireland - where the scientific evidence shows that we can intensify production sustainably - must be part of the solution.

Economic recovery is not just about jobs in urban Ireland. It is very much about balancing the opportunities for our rural economy with those of our towns and cities. As we look back on a number of difficult years of renewal in our country it is obvious that the Irish agri-food sector has played a pivotal role in economic recovery.

The positive developments in the agri-food sector are proof of the extraordinary potential across rural Ireland, if we harness it with a vision for the future, with the commitment of farmers and processors and with the right policy and government support framework.

I have no doubt that the abolition of quotas will help to unleash this significant potential.

Simon Coveney is Minister for Agriculture

Sunday Indo Business

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