“Don’t bank on improving dairy product prices anytime soon,” was the line former Kerry Group boss Denis Brosnan took when he addressed dairy and beef farmers in Nenagh on Monday night. Brosnan was guest speaker for the North Tipperary Foxhounds annual get-together sponsored by local company Agritech.
Brosnan delivered a sobering message for all farmers, suggesting supply is far outstripping demand at the moment and he can’t see that changing anytime soon.
He said: “In time there will be new demand, but supply is way outstripping demand and that is the way it will stay for the next few years. Remember New Zealand only produces 3% of world supply and it is the big producing nations that set the supply curve in the main – the EU, US etc. What will happen? The bottom line is inefficient producers will be driven out of the business – similar to what is happening in the oil sector. Based on what I know and see happening, recent Teagasc forecasts on milk price are wrong and any uplift in 2016 is not possible.”
Brosnan went through some of the supply issues in the world, highlighting the problem. “Europe is up 2% but that’s 2% of 140bn litres of milk. Europe produces 20% of world total output of milk. So remember that’s not too far from the whole output of Ireland in a year – that’s a problem. Yes, New Zealand and Australia supply is falling, but only very small volumes, and the US have driven on supply. Again, remember the US are big players, heading for a production of 90bn litres.”
On the demand side, Brosnan explained how dairy prices reached new heights in 2013 as China was “buying everything they could get their hands on”.
Listen to an interview with Denis Brosnan in our podcast below:
Brosnan suggested it will take most of 2016 for this product purchased at very high prices to wash through the system. He said that on a falling market the Russian ban was like a nail in the coffin and effectively Russian people are having to live without dairy products or a very limited volume of dairy product.
Brosnan also highlighted the fact that the countries with a high dependency on oil were traditionally great importers of dairy product and now that these countries were not making any money from oil sales the knock-on effect is lower dairy imports.
The net effect is lower prices. When pushed on how low it might go, Brosnan said in November 2014 in Tralee he had predicted 30c/litre as the low price, but he has got much more pessimistic since then and suggested the price could get back as far as 21c/l.
However, this all depended on how much dairy co-ops were going to support prices.
Brosnan on:
“Don’t bank on improving dairy product prices anytime soon,” was the line former Kerry Group boss Denis Brosnan took when he addressed dairy and beef farmers in Nenagh on Monday night. Brosnan was guest speaker for the North Tipperary Foxhounds annual get-together sponsored by local company Agritech.
Brosnan delivered a sobering message for all farmers, suggesting supply is far outstripping demand at the moment and he can’t see that changing anytime soon.
He said: “In time there will be new demand, but supply is way outstripping demand and that is the way it will stay for the next few years. Remember New Zealand only produces 3% of world supply and it is the big producing nations that set the supply curve in the main – the EU, US etc. What will happen? The bottom line is inefficient producers will be driven out of the business – similar to what is happening in the oil sector. Based on what I know and see happening, recent Teagasc forecasts on milk price are wrong and any uplift in 2016 is not possible.”
Brosnan went through some of the supply issues in the world, highlighting the problem. “Europe is up 2% but that’s 2% of 140bn litres of milk. Europe produces 20% of world total output of milk. So remember that’s not too far from the whole output of Ireland in a year – that’s a problem. Yes, New Zealand and Australia supply is falling, but only very small volumes, and the US have driven on supply. Again, remember the US are big players, heading for a production of 90bn litres.”
On the demand side, Brosnan explained how dairy prices reached new heights in 2013 as China was “buying everything they could get their hands on”.
Listen to an interview with Denis Brosnan in our podcast below:
Brosnan suggested it will take most of 2016 for this product purchased at very high prices to wash through the system. He said that on a falling market the Russian ban was like a nail in the coffin and effectively Russian people are having to live without dairy products or a very limited volume of dairy product.
Brosnan also highlighted the fact that the countries with a high dependency on oil were traditionally great importers of dairy product and now that these countries were not making any money from oil sales the knock-on effect is lower dairy imports.
The net effect is lower prices. When pushed on how low it might go, Brosnan said in November 2014 in Tralee he had predicted 30c/litre as the low price, but he has got much more pessimistic since then and suggested the price could get back as far as 21c/l.
However, this all depended on how much dairy co-ops were going to support prices.
Brosnan on:
Beef – “I run a beef business myself in the US. In the US in 2015 most of the people who bought in March/April at best broke even and at worst lost a lot. That will correct itself this spring. Producers need to think 18 to 24 months down the line when purchasing.”Kerry – “In Kerry we didn’t have a choice. We had the problem at farm level of small-scale producers. But we had an ambition in Kerry Group that we could go out as people better than anywhere in the world and convince a lot of global companies that we had what they wanted.”Brexit – “ When I think back to the 1960s when Irish Dairy Board and Tony O’Reilly were developing markets, Britain was importing lots but buying from where they could get cheapest. It will be a massive headache for Ireland if Britain leaves the EU – bigger for Ireland than Britain. I see no reason why Ireland would get preferential treatment on trading and it will go back to where it was – the best and cheapest. I wouldn’t agree that it’s a foregone conclusion they will leave.” 
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