Director of Dairy Industry Ireland (DII), Conor Mulvihill, believes that achieving agricultural emissions targets will be difficult, but achievable.
2022 was a record year for milk prices to Irish dairy farmers, but it also had a number of major challenges, with higher than every seen before input costs and energy costs.
To garner some insight into how 2022 was from a milk processor point of view, and to get an outlook for 2023, Agriland spoke to Mulvihill about various aspects of the industry.
Energy
Farmers achieved record prices for their milk in 2022, but that was against the backdrop of record inputs cost.
A lot of these same input costs, particularly around energy, also had an impact on milk processors.
Mulvihill said: “It hasn’t been an easy year, there was huge energy concerns that really put us under the cosh. Once the war in Ukraine started, there was huge concerns about continuity of energy supply.
“There was an awful lot of work put in to ensure that our case was heard, we weren’t looking for special treatment.
“But we put it in no uncertain terms in terms of continuity of food supply, and that it wouldn’t just be an economic disaster for the Irish dairy industry, but an environmental disaster if we couldn’t process milk.”
Mulvihill noted that the sector has navigated this challenge very well with the help of the EU, government and the businesses.
He noted that the second major challenge faced by processors and industry in 2022 was cost inflation.
Mulvihill said: “The second major challenge was the cost of energy, similar to how dairy farmers were affected.
“We had seen rising cost of transport for our processed goods, along with the increased cost of energy – which all had a major impact on the processors’ margins.
“What I will say is that we had a great year from a processor point of view in terms of turnover, but the margins will be much tighter.”
Agricultural emissions targets
Agriland then spoke to Mulvihill about the agricultural emissions targets which the sector has been set, the Food Vision Dairy Group report and what this means for the Irish dairy sector.
“On the back of the effort of farmers and rural communities, we now have a €16 billion industry in Ireland, both in the Republic and Northern Ireland,” he commented.
“It is by far the biggest native industry; it is the ‘Irish Apple’ at the moment.
“That has come from government-backed policy, which was implemented by farmers and has seen the sector go from 5.2 billion litres to 8.8 billion litres annually.
“We have to own our issues, we have essentially doubled our carbon footprint over the last 10 years.
“It does mean that we need to very closely look at our environmental footprint and not just GHG [greenhouse gas] emissions, but water quality, making sure we have good biodiversity and animal welfare standards – and we do.
“But we just need to keep an eye on these issues and own them and not just be defensive about them, but come together as an industry and have a plan.”
Mulvihill noted that over the course of 2022, industry, farm organisation and policy-makers where able to come together and produce a Food Vision Dairy Group report.
“We are first sector in the economy, bar none, that has a plan to 2030 and we are the first dairy sector on the planet to have a plan,” he said.
He added that although it is not perfect, the Irish dairy sector is in a much stronger position compared to other sectors in the economy.
Continuing Mulvihill said: “We have a lot to do, we have a very difficult target to achieve by law, of 25%, which farmers were rightly concerned about, as the MACC [marginal abatement cost curve] only gets us to 19% on a good day.
“We tried to address this in the report, by looking at new technology such as methane inhibitors – along with a number of other measures.
“We think the 25% target is hugely difficult, but achievable.”
Mulvihill noted that other sectors of the economy have also been set targets, such as transport with a 51% reduction target; energy which has a 80% reduction target and has actually increase by 6%.
He added that as we head into 2023, we are one third of the way through the budget and that agriculture is the only sector with plans in place.
“Because of willingness between the industry, government, farm organisations, we are going to be the one sector of the economy that will come anywhere near our target.
“Rather than looking at it in a negative way, I think we are in a really good position; I see food and dairy demand only going one direction and that is up.
“Dairy demand across the world is increasing at a rate of 2.5% each year and dairy production is maybe increasing by 1%.”
2023 outlook
Agriland asked Mulvihill about the outlook for the dairy sector in 2023 and beyond.
Commenting he said: “Moving on and putting into action the measures outlined in the dairy vision report, so we are getting on top of our emissions and water quality.
“Industry cannot do that on its own, it has to be done in tandem with government and farmers.
“It is our licence to supply what we are fighting for here, we need to take the ordinary people with us, this kind of culture war really needs to end.
“We need to start getting the public’s confidence back in terms of turning the dial with emissions and water quality in a metric based way.”
Mulvihill then gave a overview of some of what DII will be focusing on into the future to aid the continued growth of the Irish dairy sector.
“We will be heavily involved with energy and cost prices within the factory gate and looking to drive improvement to ensure factories are protected.
“The dairy sector will now also not be growing at the rate it was, so it is an opportunity to further move into the area of not just being a dairy industry but a health and nutrition industry.
“That is something that we will be working on with our members in terms of developing and attracting new companies in to add further value to our milk.”
Mulvihill said that the uniqueness of the grass-based, family farm, co-op system that Irish dairy operates is attractive to multinational companies.
“They are here already in their droves producing infant formula, sports nutrition, functional foods elder care and more,” he said.
“We are a country that exports 94% of the milk we produce, so the opportunities are enormous for the future.
“But we have to keep on the game and we cannot rest on our laurels and we need the farmers; we are nothing as an industry without the farmers.”