Irish milk deliveries could rise by over 300 million litres this year
The Irish dairy industry has undergone considerable changes since the abolition of milk quotas in 2015. Farmers are now milking more cows in bigger herds.
In the short space of time since April 2015, the Irish national dairy herd has jumped by almost 350,000 head to reach 1.4 million last year. A further 2% rise in cow numbers is expected this year.
Along with having a larger national herd, the quantity of milk produced on Irish farms is also expected to spike this year. Industry sources have suggested that a 5% increase in the total saleable milk pool would not be unreasonable when compared to 2017 supplies.
Last year, official figures from the CSO (Central Statistics Office) show that 7.268 billion litres of milk were collected by Irish creameries. This figure is expected to jump by 363.4 million litres over the duration of 2018 to reach 7.6 billion litres.
The expected rise in Irish milk production is set to be mirrored in other regions across the globe, with the US, New Zealand and the EU all anticipating milk production climbs.
Where will the increase come from?
Although Irish cow numbers are expected to rise by 2% this year, a large proportion of this increase is expected to derive from the increased maturing of Ireland’s national dairy herd.
With an extra 350,000 cows – many of which will enter their second, third, and fourth lactations this year – the individual performance of each individual cow should increase as a more mature herd profile is achieved on Irish farms.
There’s also scope to see some improvement in the milk constituents production capabilities of the national herd – again coming from an increasing age profile. Last year, CSO figures show, the milk delivered to creameries consisted of 7.57% solids (4.09% fat and 3.48% protein) – up by 0.02% on 2016 collections.
However, it must be noted that weather – one of the many variables that farmers have no control over – could have an impact on the production achieved at farm level.
As it stands, grass growth rates are currently sitting at 4kg/ha/day (dry matter) and many farmers are finding that their opening Average Farm Covers (AFCs) are lower than this time last year.
Milk price worries
Despite the potential for additional production, the milk price outlook does not appear to be as positive. Late last year, Teagasc economists cited falling butter prices and an overhang of intervention stocks as two major worries for the year ahead.
Representatives of the research body suggested that Irish milk prices would fall – on average – by 10% in 2018 to sit at 32-33c/L. However, the potential for further solids improvements were cited as a possible means to insulate farmers against such prices.
Just this week, the European Commission for Agriculture and Rural Development, Phil Hogan, has warned that “alarm bells” should be ringing now for Irish dairy farmers intent on ramping up production.
The commissioner has stressed that producers must take account of European market signals, which currently indicate a “very clear signal“ of oversupply as a result of higher prices – particularly in the last few months of 2017.
Speaking to AgriLand, the commissioner cautioned that Irish farmers converting to dairy – and those planning to expand herd size – should consider all “inherent entrepreneurial risks”.
“The days of the Common Agricultural Policy (CAP) propping-up farmers’ businesses are long gone,” he said.
“Our focus now is on market transparency and information – on making it easier for farmers to take the informed decisions they need to run their businesses (or indeed start their businesses) effectively.
Higher prices have encouraged milk production; but, it is really important that producers do not respond only to short-term market indicators, such as rising prices.
January milk prices
Creameries have met over recent days to set the milk price for January’s collections. Lakeland Dairies decided to hold its base milk price for January supplies.
This means that suppliers will get a base price of 35.5c/L including VAT, having withdrawn the 1c/L butter bonus which has been paid monthly from September to December inclusive.
Lakeland joins the recent trend of processors holding their milk prices for January supplies, with Glanbia and Kerry also keeping figures steady.
Kerry will hold its January milk price at 36c/L including VAT; this represents the fifth month in a row that the processor has decided to hold its milk price.
As well as this, it was announced that Kerry will pay a top-up of 0.8c/L including VAT on all milk supplied in 2018 – milk included in fixed milk price contracts will not be eligible for the top-up.
This top-up payment is being issued in order to fulfil Kerry’s milk contract commitment. Last week, Glanbia Ireland decided to hold its milk price for January supplies.
It will pay its suppliers 35c/L including VAT for January for manufacturing milk supplies at 3.6% butterfat and 3.3% protein.
‘Milk price must be held’
Despite the negativity surrounding milk prices in some quarters, the ICMSA’s (Irish Creamery Milk Suppliers Association’s) Gerard Quain said milk price “can and must” be held at current levels.
Pointing to the stability of the PPI index at 111.3, the dairy committee chairman said it shows the improve resilience in dairy markets and demonstrates again ICMSA’s belief that current price levels can be maintained.
Quain said that all three GDT Auctions in 2018 have been positive while Dutch dairy quotations firmed notably in recent weeks.
He explained: “The 5.9% increase in the most recent GDT auction was achieved by increases in all products sold – with butter, SMP (skimmed milk powder) and WMP (whole milk powder) achieving over 7% gains.
European quotes for butter are holding strong and remain at a historically high level in the mid €4,000/t range.
“Dutch quotations for the butter/SMP mix have rallied in the last four weeks, while WMP price has increased by over 2c/L since the start of the year – and has regained some of the ground lost in the run-up Christmas,” the chairman added.