January 28, 2013

In case quotas disappear in 2015, Ireland's dairy farmers are starting to be worried on flooding their market with cheap cheese.

That is the view of Catherine Lascurettes, executive secretary of the National Dairy and Liquid Milk Committee of the Irish Farmers' Association, who was speaking at the Semex conference.

Despite the dairying potential and enthusiasm for expansion, calls from the Irish Government to increase milk production by 50% by 2020 (from 5.2 billion litres to 7.8 billion), significantly more dairy heifers in the pipeline - and increasing genetic merit of those replacements - the main processing investments so far in Ireland to cope with the additional milk after 2015 had been by Glanbia and Dairygold. And these were powder plants.

In addition, farmers would have to invest GBP1.5 billion (US$2.4 billion) on their farms to deliver that 50% increase, and that needed to be matched by a significant investment from other co-ops.

"Ireland is well placed to capitalise on 2015 and the freeing-up of the quota regime. It has low production costs, good grass and plentiful water, well-trained enthusiastic farmers, a farmer owned industry, a clear strategy and blueprint, increasing genetic merit in the herd and a politically supportive Government," she said.

"But there are a lot of difficulties to overcome too. Twinned with the huge investments necessary there are challenges over Ireland's notoriously seasonal supply curve, its farmer's access to credit [which is worse in Ireland than the UK], land prices and availability, farm fragmentation, business expansion skills, variations in efficiency levels, uncertainty on CAP reform and volatile milk prices and margins. We have a lot of challenges to overcome. No one should be worried that the UK market will be flooded after 2015. There will be new markets for Ireland in Asia, the BRIC countries, North and South Africa and Europe, and we will continue to make the full range of dairy products, not just cheese," she said.

She admitted she did not know whether a 50% increase in production was realistic by 2020, but thought that a 25-30% increase might be. But that would depend entirely on margins. The current Irish price was around EUR0.33 (US$0.44), while the cost of production was EUR0.24 (US$0.32), excluding labour and investment costs.