A significant milk price increase is ‘increasingly unlikely anytime soon’

Dairy farmers face an uncertain outlook and any significant milk price recovery looks increasingly unlikely, a leading industry expert has warned.

But Kerry Group General Manager Padraig Sayers had more promising news for young farmers for the long term, predicting demand would continue to increase, with production from the current low-cost producing regions like Ireland best placed to meet it.

Mr Sayers was addressing a group of around 300 young farmers at an agri seminar organised by Macra na Feirme and AIB in Castleisland, Co Kerry last night.

The seminar chaired by CEJA president Alan Jagoe, also heard from Paul Nolan of Dawn Meats, Liam Woulfe of Grassland Agro and AIB agri advisor Donal Whelton.

milk price
Frank Hayes, Kerry Group, Donal Whelton, AIB, Liam Woulfe, Grassland Agro, Padraig Sayers, Kerry Gorup. Front: Paul Nolan, Dawn Meats, Alan Jagoe, Macra na Feirme, Sean Healy, AIB.

The dairy man said 2016 would go down as another difficult year for the sector, adding that it was all about supply and demand and keeping the price right.

Over the past 10 years, the Kerry milk price averaged at 31c/L but increasing milk solids and keeping the cost base correct, translated to 33c/L, he said.

For planning purposes, Mr Sayers said this was the best indication of how things would be going forward.

He said: “Volume has increased significantly in 2015 and I suppose there was an expectation that it would with quotas being abolished.

“I suppose to some degree that increase, particularly with some of our neighbours in Europe, has been above expectations.”

He pointed out that globally, there has been a 4bn tonne increase in milk against an increase in demand of about 1.3bn tonne.

He said the Fonterra cash payout forecast for 2016 was the equivalent of around 20c/L but there was even some speculation this would be revised downwards again in the coming months.

Milk Price Future

However, Sayers said demand from developing countries was holding even if the global market was dependent on countries like China.

“The conclusion is that the outcome is uncertain and I would certainly be talking about a delayed recovery on any significant increase in dairy markets at the minute and it’s very difficult to say when this will happen,” he added.

But he said he was convinced that longer term, demand would continue and therefore prospects were good.

Donal Whelton, an Agricultural Advisor with AIB, advised young farmers at the seminar that if they are considering a future in farming they should put goals and a plan in place for their future.

“Sit down and look at where you want your career to be over the next 3-5 years

“Don’t feel under pressure to follow the route of others – decide yourself what you want to do.”

He also advised that a good business plan should be a “living document” and it should be revisited/reviewed during the year.

Skills For Successful Farming

The skills required to make a business successful, he warned are not just those you might learn in college.

“Young farmers should ask themselves have they the skills to make a business successful. The financial and people management skills that are vital to be successful.”

And a key relationship is that with your bank, he advised. “Keep the bank informed on a constant basis of the progress of your business.”