The challenges facing the liquid or fresh milk sector in Ireland dominated last Friday’s IFA liquid milk forum, the first event to bring together stakeholders from all parts of the chain.
The liquid milk market is worth an estimated €550m in Ireland and is supplied by 1,769 specialised producers, who account for about 9% of dairy farmers. The day featured numerous statistics, but the key ones were:
Five large retail chains – Tesco, SuperValu, Dunnes, Lidl and Aldi – now dominate the business and their own-label brands account for 55% of milk sales.Northern Ireland-sourced milk has a 26% share of the Republic of Ireland fresh milk market and is particularly strong in the catering trade.Liquid milk production adds at least 2c/litre to the farmer’s milk production costs. Furthermore, it adds complexity to the system, to the detriment of technical efficiency.Teagasc expert Joe Patton was blunt in his assessment. “Many liquid milk farms would be best served by exiting the sector,” he said, noting that 2013 was the first occasion when profit per hectare, per cow and per litre were all higher in spring-calving systems.
He explained that a 120 cow liquid milk production herd requires 892 hours of extra labour input per year compared to a spring-calving system.
The Teagasc expert explained that milk production costs are, on average, two cent per litre higher in liquid milk herds. Feed and labour costs are the main driver.
“Autumn calving adds 1.6c/litre to feed costs, accounting for 80% of the difference between winter and spring-calving systems,” he explained.
Interestingly, Joe Patton highlighted the higher “opportunity costs” of an all-year-round milk production system – the loss of technical efficiency caused by trying to breed cows and calve them at the same times of the year, as well as the physical and mental fatigue that is part of milking for 365 days per year.
“The imposition of a liquid contract complicates decision making,” he told the forum, which was attended by stakeholders from all parts of the fresh milk chain.
The additional labour required to manage a liquid milk herd would cost €10,704 if paid labour was employed, he said. In many cases, this labour is family labour. Joe Patton highlighted data from Northern Ireland, which showed that the average dairy farm in that region is making a very low return per hour worked. Data from DairyCo in Britain also showed superior returns from grass-based systems.
Joe Patton examined the likely consequences of next year’s removal of milk quotas on the liquid milk sector. He looked at a scenario where more cows are added to the spring-calving portion of the herd, over time leading producers to question the merit of retaining any autumn-calving cows.
When it was put to him that land availability around the milking parlour was the main barrier to farmers switching from liquid to spring production, Joe Patton disagreed. “Poor herd fertility is the main issue,” he said. A split calving system allows cows to be carried over from one calving season to the next, he explained.
Stakeholders to meet again in autumn
IFA liquid milk committee chairman Teddy Cashman stressed that a supply of fresh milk cannot be taken for granted and highlighted the key steps needed in order to secure €500m worth of local, year-round fresh milk:
The inclusion of fresh milk in the Food Harvest 2020 plan.A revitalised national milk agency with large retailers represented.Teagasc to monitor and flag input cost volatility in real time. He proposed a follow up stakeholders meeting in the autumn.
Dramatic change in retail landscape
The fact that 26% of the domestic fresh milk market has been lost to imports is a key concern for producers, but Muiris Ó Céidigh of the National Milk Agency (NMA) eplained that the NMA has no jurisdiction over imported milk.
“Imports were not even contemplated when we were established,” he explained.
His presentation tracked the changes in prices over the past 20 years, with the 2013 price of 38.87c/litre being the highest average on record. However, it was also the lowest differential, with a gap of only 0.80c/litre above manufacturing milk price. The differential averaged 4.21c/litre over the past 20 years, he said.
Recent years have seen a very significant change in the payment system operated in Ireland. Flat price contracts have shrunk from 85% in 1995 to just 15% today. “Manufacturing Plus” contracts, which pay a premium over the manufacturing milk price, now dominate at 86% of contracts.
He said that the NMA works closely with the National Dairy Council (NDC) which, as a producer rather than statutory organisation, has more freedom in what it can do.
The NMA chief executive was critical of retailers that stock some lines of (NDC) approved milk, but have lines of non-NDC milk alongside. “It’s insidious – you make the assumption it’s all NDC milk.”
Muiris Ó Céidigh highlighted the dramatic increase in the power of the major retail chains, with the top three controlling 75% of the market and the top five just under 90%.
Tesco committed to buying Irish milk
All of the fresh milk in Tesco Ireland comes from Irish farms and carries the NDC logo, according to Kern Kinnear, commercial business manager with the retail giant.
“Tesco Ireland is absolutely committed to sourcing 100% Irish fresh milk,” he told the IFA liquid milk forum in Dublin on Friday.
He said that the company was the first to achieve full NDC accreditation in 2011 and sells 75m litres of Irish milk per year. Approximately 60% of milk sold in Tesco is own label, he said.
He said that local brands remain very important to Irish consumers and over 50% of Tesco stores have the ability to stock local milk. Tesco has a 26% share of the Irish grocery market and an estimated 16% share of the market for fresh milk.
Tesco is seeing huge growth in sales of flavoured milks this year, Kern Kinnear told the forum. The commercial business manager said that young active sports people seem to be moving away from supplements as their source of protein and looking for milk products.
Eoghan Sweeney, general manager of Aurivo dairy, revealed that 70% of the western co-op’s fresh milk sales volume is now in supermarket own-label format. He added that 20% of sales volume is in 3 litre plastic jugs, compared to 15% in the same period last year. Aurivo has 200 liquid milk suppliers across the company’s nine-county catchment.
The challenges facing the liquid or fresh milk sector in Ireland dominated last Friday’s IFA liquid milk forum, the first event to bring together stakeholders from all parts of the chain.
The liquid milk market is worth an estimated €550m in Ireland and is supplied by 1,769 specialised producers, who account for about 9% of dairy farmers. The day featured numerous statistics, but the key ones were:
Five large retail chains – Tesco, SuperValu, Dunnes, Lidl and Aldi – now dominate the business and their own-label brands account for 55% of milk sales.Northern Ireland-sourced milk has a 26% share of the Republic of Ireland fresh milk market and is particularly strong in the catering trade.Liquid milk production adds at least 2c/litre to the farmer’s milk production costs. Furthermore, it adds complexity to the system, to the detriment of technical efficiency.Teagasc expert Joe Patton was blunt in his assessment. “Many liquid milk farms would be best served by exiting the sector,” he said, noting that 2013 was the first occasion when profit per hectare, per cow and per litre were all higher in spring-calving systems.
He explained that a 120 cow liquid milk production herd requires 892 hours of extra labour input per year compared to a spring-calving system.
The Teagasc expert explained that milk production costs are, on average, two cent per litre higher in liquid milk herds. Feed and labour costs are the main driver.
“Autumn calving adds 1.6c/litre to feed costs, accounting for 80% of the difference between winter and spring-calving systems,” he explained.
Interestingly, Joe Patton highlighted the higher “opportunity costs” of an all-year-round milk production system – the loss of technical efficiency caused by trying to breed cows and calve them at the same times of the year, as well as the physical and mental fatigue that is part of milking for 365 days per year.
“The imposition of a liquid contract complicates decision making,” he told the forum, which was attended by stakeholders from all parts of the fresh milk chain.
The additional labour required to manage a liquid milk herd would cost €10,704 if paid labour was employed, he said. In many cases, this labour is family labour. Joe Patton highlighted data from Northern Ireland, which showed that the average dairy farm in that region is making a very low return per hour worked. Data from DairyCo in Britain also showed superior returns from grass-based systems.
Joe Patton examined the likely consequences of next year’s removal of milk quotas on the liquid milk sector. He looked at a scenario where more cows are added to the spring-calving portion of the herd, over time leading producers to question the merit of retaining any autumn-calving cows.
When it was put to him that land availability around the milking parlour was the main barrier to farmers switching from liquid to spring production, Joe Patton disagreed. “Poor herd fertility is the main issue,” he said. A split calving system allows cows to be carried over from one calving season to the next, he explained.
Stakeholders to meet again in autumn
IFA liquid milk committee chairman Teddy Cashman stressed that a supply of fresh milk cannot be taken for granted and highlighted the key steps needed in order to secure €500m worth of local, year-round fresh milk:
The inclusion of fresh milk in the Food Harvest 2020 plan.A revitalised national milk agency with large retailers represented.Teagasc to monitor and flag input cost volatility in real time. He proposed a follow up stakeholders meeting in the autumn.
Dramatic change in retail landscape
The fact that 26% of the domestic fresh milk market has been lost to imports is a key concern for producers, but Muiris Ó Céidigh of the National Milk Agency (NMA) eplained that the NMA has no jurisdiction over imported milk.
“Imports were not even contemplated when we were established,” he explained.
His presentation tracked the changes in prices over the past 20 years, with the 2013 price of 38.87c/litre being the highest average on record. However, it was also the lowest differential, with a gap of only 0.80c/litre above manufacturing milk price. The differential averaged 4.21c/litre over the past 20 years, he said.
Recent years have seen a very significant change in the payment system operated in Ireland. Flat price contracts have shrunk from 85% in 1995 to just 15% today. “Manufacturing Plus” contracts, which pay a premium over the manufacturing milk price, now dominate at 86% of contracts.
He said that the NMA works closely with the National Dairy Council (NDC) which, as a producer rather than statutory organisation, has more freedom in what it can do.
The NMA chief executive was critical of retailers that stock some lines of (NDC) approved milk, but have lines of non-NDC milk alongside. “It’s insidious – you make the assumption it’s all NDC milk.”
Muiris Ó Céidigh highlighted the dramatic increase in the power of the major retail chains, with the top three controlling 75% of the market and the top five just under 90%.
Tesco committed to buying Irish milk
All of the fresh milk in Tesco Ireland comes from Irish farms and carries the NDC logo, according to Kern Kinnear, commercial business manager with the retail giant.
“Tesco Ireland is absolutely committed to sourcing 100% Irish fresh milk,” he told the IFA liquid milk forum in Dublin on Friday.
He said that the company was the first to achieve full NDC accreditation in 2011 and sells 75m litres of Irish milk per year. Approximately 60% of milk sold in Tesco is own label, he said.
He said that local brands remain very important to Irish consumers and over 50% of Tesco stores have the ability to stock local milk. Tesco has a 26% share of the Irish grocery market and an estimated 16% share of the market for fresh milk.
Tesco is seeing huge growth in sales of flavoured milks this year, Kern Kinnear told the forum. The commercial business manager said that young active sports people seem to be moving away from supplements as their source of protein and looking for milk products.
Eoghan Sweeney, general manager of Aurivo dairy, revealed that 70% of the western co-op’s fresh milk sales volume is now in supermarket own-label format. He added that 20% of sales volume is in 3 litre plastic jugs, compared to 15% in the same period last year. Aurivo has 200 liquid milk suppliers across the company’s nine-county catchment.
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