A SWOT (strengths weaknesses, opportunities and threats) analysis of Irish dairy towards the end of 2023, I would suggest, highlights the huge resilience of the dairy sector.
Resilience, not only to the political onslaught of the last number of years which attempted (somewhat farcically) to place Irish dairy cows at the centre of global climate challenges, but to the ability of dairy farmers and processors to manage a plethora of ‘market volatility’ threats.
These included Brexit from 2016 and the Covid-19 shutdown of a huge chunk of dairy markets in the restaurant, out-of-home category across the globe from early 2020 through 2022.
Another threat was the huge surge in input costs arising from energy and fertiliser hyperinflation shocks due primarily to the Russian invasion of Ukraine.
And we can’t ignore the volatility in international dairy prices which has seen prices fall from a high in 2022 of 65c/L (including bonuses) to the mid 30c/L currently.
Additionally, the regulatory impact of sectoral carbon budgets and the challenge to Ireland’s nitrates derogation will also have major impacts.
Notwithstanding ‘improved’ EU state aid rules which would enable Enterprise Ireland to provide higher grant support for decarbonisation, such a measure (decarbonisation) will cost significantly more than even the most improved grant supports.
In essence, the combination of a major increase in regulatory costs, plus global dairy market price volatility, represent a fundamental challenge to Irish dairy competitiveness.
Dairy in Ireland
Against this background of increased production cost at dairy farm and milk processing levels, the announcement that Nestlé intends to cease operations in its infant formula plant in Askeaton, Co. Limerick is bad news indeed for the 540 people employed at the plant.
It is, I would suggest, a reflection of this challenge to dairy Ireland competitiveness.
Nestlé’s statement states that reduced demand for infant formula from China is at the heart of its decision to cease operations in Ireland.
Unfortunately, in addition to the cost competitiveness challenge highlighted above, the hostile noise and vilification of Irish dairy over the last number of years has not helped the cause for continuing investment in dairy in Ireland, particularly in a multinational context.
This 2023 Nestlé decision is in contrast to the more positive news relating to investment in Ireland post-quota abolition in 2015.
Not only did indigenous Irish dairy companies signal major investment in dairy growth post-2015, with consequent increases in local employment, exports and value added, there were a number of joint investments with international partners, particularly in cheese manufacturing from 2016 to 2018.
Challenges
Unfortunately, a number of these key cheese investments, which represented a strategic response to Brexit and consequently Ireland’s need to reduce its cheddar cheese production and diversify into other cheese varieties, were significantly delayed at huge cost by planning and environmental challenges, mainly by An Taisce.
Furthermore, an examination of submissions to the Foodwise policy process in 2010, when dairy growth was being prioritised in Ireland following the EU decision to abolish milk quotas, shows that An Taisce submitted its opposition to Irish dairy growth post-quota, on the basis that this would mean an increase in exports of infant formula from Ireland.
An Taisce suggested this would “encourage” more Chinese mothers to cease breastfeeding… oh dear.
Indeed this mantra has been regularly relayed in the D4 media by An Taisce representatives who continue, across a range of platforms, to promote the need for Ireland to cease and desist livestock-based agricultural activity.
Not long ago, the Irish attorney general, on behalf of the government, joined the Supreme Court case involving An Taisce and the Kilkenny cheese plant.
The government saw that the challenge in this case – that all potential upstream and downstream emissions from a factory (any factory) should be included in an assessment of environmental impact – would have made Ireland unattractive for investment, and not just in dairy.
A reading of the summary of the Supreme Court judgement emphasises that the judges understood this too, and that’s why they ruled against An Taisce.
Accountability
The adult/accountable approach to decarbonisation and environmental challenges is that shouting for all activity to stop is not an option.
The government action in providing all citizens with financial support to purchase expensive fossil-fuel-based energy last winter, while working on a long-term reduction in dependence on fossil fuels, illustrates the complexity of these challenges.
The obligation of true accountability to ensure society continues to function while change is managed was also demonstrated.
A key theme of Budget 2024 and overall prudential fiscal policy has been to adopt a ‘rainy day’ approach.
This rainy day has come to the dairy sector, not just based on volatile global market factors, but additionally through regulatory cost plus requirements to decarbonise and ‘absorb’ increased production costs.
Support for the dairy sector, whether as identified in the National Economic and Social Council (NESC) Just Transition in Agriculture report, or in the new climate fund, would underpin the core resilience of the sector.
I would suggest it demonstrates that Ireland is still open for dairy business and rejects the ‘year zero’ approach of those without accountability.