International dairy markets will not strengthen until, at least, the second half of 2016, according to Ornua Managing Director, Joe Collins.
“But it could take a further period of time before any upturn in world milk markets has a trickledown effect at farm level here in Ireland,” he said.
Collins was giving evidence to the Joint Committee on Agriculture, Food and the Marine this afternoon.
He said that relatively small changes in world dairy output can impact on market prices.
“Partly, this is because the dairy production cycle is quite long, relative to other commodities, and the fact that dairy markets have become totally internationalised.
This has led to increased levels of volatility with swings of 240% apparent since 2008.”
Collins confirmed that Ornua had put in place a six-point plan, which had been designed to minimise the impact of volatility on the Irish dairy market.
“This includes the development of keynote brands, Kerrygold being a case in point, adding value to our dairy output and diversifying our export drive. This latter point has had implications both geographically and the sectors that we are targeting.
“And it’s a strategy that’s working. Our Purchase Price Index has fluctuated by a factor of 10% over the past 12 months. This compares extremely well with the 66% and 55% price swings recorded by the Fonterra and Dutch dairy auctions respectively over the same period.”
Collins confirmed that the EU dairy sector is currently benefitting from the weak Euro.
“This is helping boost Irish dairy exports to many new markets around the world. We are also seeing an upsurge in dairy consumption levels throughout the US and Europe. This is further good news for Irish milk producers.
“On the down side the continuing Russian food import ban is having a detrimental impact on the EU’s dairy sector.
“The downturn in dairy exports to China can be partly accounted for by the resurgence in that country’s indigenous milk sector throughout 2015. The recent economic downturn in China has also had a negative impact on dairy consumption levels.”