Souring milk market may drive many out of dairy

Irish dairy farmers are bracing themselves for further falls in milk prices amid fears the current market slump may drive many out of the industry.

The ending of the EU’s long-standing quota system in April should have been a boon for Ireland’s under-achieving dairy sector.

However, it has coincided with the worst market crash in six years tied to an unexpected collapse in Chinese demand and to Russian import sanctions.

This week’s Global Dairy Trade auction, which sets the main reference price for products internationally, saw prices fall a further 10.6 per cent, having more than halved over the past year.

The latest official figures here put the average price per litre paid to farmers at 29.6 cent, down from 34 cents in January and 43 cents last year, making milk cheaper than bottled water in many supermarkets.

Farming industry body Teagasc estimates the average cost of production in Ireland is 25 cent a litre even before labour costs.

Urgent increase

The crisis has prompted Minister for Agriculture

Simon Coveney

to call for an urgent increase in the EU intervention price for milk to avert a full-blown crisis in rural Ireland.

“There can be no doubt that softening of global dairy markets has had an impact on dairy farmers in Ireland and throughout the EU and the possibilities remain for this to continue,” he said.

This has put him at odds, however, with EU agricultural commissioner Phil Hogan, who wants to ween the sector off intervention and insists farmers must obey the "market signals" .

However, the Commission has agreed to extend the window for processors to sell into intervention beyond the original September 30th deadline.

Using Central Statistics Office data, the Irish Creamery Milk Suppliers Association (ICMSA) estimates Irish dairy farmers cumulatively generated €748 million in revenue for the first five months of this year, some €218 million less than same period last year as a result of the fall in global prices.

ICMSA deputy president Pat McCormack said the industry was at a critical juncture in the cycle “where farmers are now actually losing money on every litre of milk that goes out the gate”.

He welcomed Mr Coveney’s acceptance that the previous “hands off” policy adopted by the Government was “simply unequal to the huge challenges now facing milk suppliers”.

New Zealand’s Fonterra – the world’s largest dairy exporter, employing more than 18,000 staff in 40 countries, announced this week it planned to cut 3 per cent of its workforce in response to the slump in prices.