658 liquid milk producers have exited the fresh milk supply chain over the past 10 years, a reduction of 35%, according to a new report.
In its annual report for 2022, the National Milk Agency said that the number of registered producers that supply milk all year round for the domestic fresh-milk market continued to decline.
The continuity and sustainability of the all-year-round milk supply model is being increasingly challenged by the alternative lower cost model of seasonal, pasture-based milk supply for manufactured dairy products for export.
In the 2021/22 milk year the number of registered producers with contracts decreased by 38 producers or 3%, to 1,286 registered producers.
Registered producers with contracts accounted for 8% of all milk producers in the state and had annual milk supplies of 915 million litres in 2022, which were equivalent to 10% of domestic milk supplies.
284 producers or a quarter of registered producers with all-year-round contracts supplied half of the all-year-round supplies of milk for processing for liquid consumption in 2021/22.
Report
The National Milk Agency was established by the Oireachtas to regulate the supply of milk for liquid consumption throughout the state.
It is entirely funded from a levy which stands at 0.115c/L of milk purchased for processing for liquid consumption.
Last year, income from that levy increased by 1% to €472,796. However, operating costs stood at €550,914, which is an increase of €39,728 or 8% on 2021.
The excess of costs of over income resulted in a deficit for the year of €78,118, compared with a deficit of €44,255 in 2021.
The resultant negative cashflow of €72,824 decreased the agency’s cash balance to €783,867, the report said.
Denis Murphy, chair of the National Milk Agency, said that 2022 was an “extraordinary and record-breaking year for the dairy sector”.
Domestic milk supplies increased to 8.82 billion litres with record average protein and butterfat milk solids of 7.83%.
The annual average producer price for manufacturing milk supplies increased to 57c/L, excluding VAT, for milk containing 3.55% protein and 4.28% butterfat, an increase of 18c/L or 47% on 2021.
For registered milk producers the annual average milk price for contracted milk supplies in 2022 was 57.90c/L, an increase of 18.11c/L or 46% on 2021.
The number of dairy cow numbers increased by 1% to over 1.63 million and accounted for 22% of the total cattle population. Average milk yield per cow decreased by less than 1%.
The report noted that record producer milk prices helped to offset increases in fertiliser, feed and energy costs in 2022.
The domestic fresh-milk market is the largest consumer market for milk and milk products in the state, with an estimated retail value of €595 million in 2022.
Irish consumers continued to have one of the highest per capita consumptions of fresh drinking milk in the world, with an annual consumption of 111L per capita in 2022.
The report notes that sales through the food service channel, which accounted for 18% of fresh-milk sales increased by 28% as consumers returned to out-of-home dining.
Sales through the doorstep channel, which accounted for 4% of fresh-milk sales, decreased by 23% as consumers returned to buying at retail.
Imports of 156 million litres had a market share of 28% and were comprised of an estimated 99 million litres of milk, which were packaged outside the state and 57 million litres of bulk milk, which were imported into the state for processing for liquid consumption.
Retailers
Consumption of fresh milk increased by 1% to 567 million litres, despite an increase of 17% in the national average retail price of milk.
This was the first substantial increase in the retail milk price in over 10 years, the agency said.
The report also states that “retailers can create or destroy value for all stakeholders in the fresh-milk supply chain”.
In recent months, some of the major retailers have announced reductions in the price of their own-brand milk.
The agency pointed to the influence of retailers in the supply chain:
“Retailers are the price setters for own-label sales and determine not only the retail price of milk to consumers, but also the wholesale price of milk and ultimately the price paid to producers.”
In 2022, retailers’ own-label milk increased their market share as consumers curbed their spending as they dealt with inflation.
Future dairy outlook
The agency notes that the outlook for global dairy markets in 2023 is “challenging” as market dynamics have changed.
Weakening global demand since the commencement of the year is reflected in lower export dairy product prices and a sequence of rapidly falling producer milk prices, it said.
In the second half of the year demand and prices are expected to improve as milk supplies tighten.
“The domestic fresh-milk market is expected to be stable, albeit that the domestic supply chain may be impaired as registered producers weigh up their options either to continue with all-year supplies or change over to a seasonal supply model,” the report said.