Kevin Lane, the CEO of Ornua, said he is hopeful that the industry is entering a phase where the returns to dairy farmers will be in excess of 30c/L.
Speaking at today’s Positive Farmers Conference in Co. Cork, Lane said that he is confident that these returns will be achieved in the near future.
Lane also discussed the prospect of reintroducing the €7m farmer-funded Ornua levy.
He said that Ornua will make a decision on whether or not to reintroduce the levy once milk price rises above 30c/L, which he said could happen within the next three-to-four months.
The Ornua CEO also spoke about the outlook for international dairy markets.
The start of the correction of milk price has been the correction of supply and that has happened in the EU, in particular, and also in Argentina and New Zealand.
He said that the Voluntary Milk Reduction Scheme has had very minor impact on volumes, despite many people thinking that it would have a very strong impact, while the US dollar has helped to keep US dairy products less competitive on international markets.
From an Irish point of view, Lane pointed out that worldwide low-grain prices are a negative, as they allow the high-input regions to continue to produce milk.
“From an Irish stand point, we would love to see grain price and concentrates quite high, which would suppress demand in those places.
Looking at our closest neighbours, he said that the UK farming structure has been damaged and awful lot of UK farmers have gone out of farming and sold off their cows.
“But more recent information is telling us that they may recover faster if milk price reflects that,” he said.
The Ornua Chief also said that demand has been positive and solid, but demand will be tested once product prices move over the €3,000/t mark.
He also highlighted the importance of oil prices and said once prices fall below $60/barrel, it has a negative impact on the demand for dairy products in oil producing states.
When oil prices are in $70-80/barrel range, they don’t have the buying power or currency to be a big importer from Ireland or indeed the EU.
Lane also said the UK becomes more challenging for the Irish dairy sector in a post-Brexit scenario, while he also said that caution is needed as there is a massive legacy of powder stocks sitting in the EU and the US.
“They [milk powder stocks] are certainly going to depress that market when they start coming out.
“The Commission was a buyer of 300,000t of milk powder in 2016 and they are going to be a seller in 2017,” he said.