Farmers used to call it white gold, as milk production delivered real wealth to farms. This is no longer the case – and many dairy farmers may be forced to leave the industry
LAST WEDNESDAY, Minister for Agriculture Brendan Smith met a unique delegation from the Irish Dairy industry.
He and his officials were on one side of the table, and on the other was the entire Irish dairy sector – farmers, processors and marketers, united for once in their lives.
They came to plead with Smith for help for what is Ireland’s most valuable indigenous industry, which last year exported €2.2 billion of products, and employs not only 20,000 farmers directly but 30,000 others in related jobs.
For many years the dairy farmer was envied. He had regular income through his monthly milk cheque, valuable resources in his dairy cows and a steady demand for what he produced – even if at times that market was the EU itself, with its butter mountains.
Now the future looks bleak. Demand for dairy products has slumped worldwide, especially in Asia and China particularly – where a scandal involving the use of melamine in the manufacture of milk products led to the deaths of children.
While demand has dipped, world production has increased, especially in the US where it grew by nearly 3 per cent a year for the past five. In Brazil and other exporting countries, production was cranked up to meet the rise in food prices caused by high oil costs, while cereal crops were also being diverted to energy crops.
Other elements have also kicked in, including high energy costs here and the fact that 35 per cent of Irish dairy products go to the UK market, where the lower value of sterling has caused difficulties for exporters and a drop in market supports from the EU. Farmers and exporters are also claiming difficulty in obtaining credit from the banks.
At a meeting of the Joint Oir-eachtas Committee on Agriculture, the stark facts were laid before the committee by the same team last week. Farmers said they could not continue to produce milk at a loss-making price of 22 to 24 cent per litre, and would need a minimum of 26 cent per litre to break even.
The processors said they were not getting returns which could justify paying any more than they do, and John Tyrrell of the Irish Co-operative Organisation Society said the co-ops had supported the milk price paid to farmers to the tune of €100 million last year.
Food Board chief executive, Aidan Cotter was forced to admit that global economic uncertainty made the timing of any recovery in demand levels for dairy products somewhat uncertain, which was likely to lead to ongoing market volatility in the short term.
He urged a hard look at the Irish dairy industry’s product mix, which should see more cheeses and specialised ingredients being produced for specific markets which are being investigated by a special team at the Food Board.
The farm groups have warned that the situation cannot continue and that thousands of dairy farmers will be forced to quit.
This would endanger the structure of the dairy processing sector, they said, as the solution would not be as simple as the remaining farmers increasing output to take up the slack, because all production of milk is now at a loss.
The industry wants the Minister to press his European colleagues to help the sector and bring in higher levels of intervention, which would see surplus product being purchased and stored by the commission until prices recover.
It wants Brussels to impose the same regulatory standards on imported dairy products as are imposed in the Union, and to kick-start commercial purchases on the EU and export markets.
Mr Smith has yet to respond.Meanwhile, the industry waits for whatever next blow may fall.