Ireland Seek Expansion as EU Milk Quota Unravels

IRELAND - The planned dismantling of the EU milk quota system will open up new opportunities for Irish milk producers to expand.
calendar icon 27 November 2008
clock icon 3 minute read

The Teagasc National Dairy Conference in Cork heard how Ireland is one of just six countries in Western Europe that is expected to be able to expand milk production in line with the quota increases agreed as part of the CAP ‘health check’.

Preben Mikkelsen, a Danish dairy and food consultant, told dairy farmers at the conference today, Wednesday, 26 November, that the structure of milk production in Ireland is a major challenge to expansion, and that the Irish dairies have to combine to be competitive.

He also said that it is essential to establish an efficient quota allocation system, without restrictions, to allow the structure of milk production to improve. Preben Mikkelson was positive about the future demand for dairy products pointing out that consumption in the European Union is expected to increase by the equivalent of 8 million tonnes of milk by 2014, while global demand is expected to increase by 2.5% per annum.

Speaking at the National Dairy Conference, Teagasc Director Professor Gerry Boyle said that milk price volatility is now a fact of life due to the reduction in market supports. But he said that Teagasc research has shown that with ‘best management practices ‘expansion can be profitable. He said that farmers will need to implement strategies to deal with price volatility if expansion in milk production is contemplated. Relentless cost containment will be a critical element of any strategy. Professor Gerry Boyle said that even looking at a conservative expansion scenario of a 23 per cent increase in quota by 2020, it could add €750 million to Ireland’s GNP.

Dairy farmer, Shane Fitzgerald from Ballynoe, Co. Cork outlined his strategy to control milk production costs on his farm. His goal is to put in place a low cost milk production system that will leave a profit margin, even in periods of low milk price. In 2008, Shane Fitzgerald estimates that his feed and fertilizer costs will be down by €62 per cow, yielding a saving of €7,440 for his 120 cow herd. This cost saving was achieved at a time when the price of both feed and fertilizer increased compared to the previous year, and was due to increasing the amount of grazed grass in the cow’s diet and by utilizing slurry to reduce artificial fertilizers usage.

Teagasc Dairy researcher, Pardaig French said that farmers with low milk production costs can expect to achieve a good return on investment from increasing output using grass based systems with low capital investment in depreciating assets. He advised producers who can produce milk at less than 15 cent per litre common costs to consider expanding, while his advice for producers with common costs over 20 cent per litre to focus on adopting technologies to reduce costs in order to increase farm income.

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