Ireland’s seasonal milk production model is one of the biggest challenges to moving up the dairy value chain and processing more milk into higher margin products, according to James Caffyn, a senior consultant with GIRA market intelligence.

“There is a strong seasonal variation in Irish milk supply. It’s very difficult to move up the added value chain when you get so much of your milk in such a short space of time,” said Caffyn, who was speaking at the Irish Farmers Journal Dairy Day event in Punchestown this week.

As part of a discussion on added value, Caffyn explained how dairy companies across the world struggled to add value to milk when faced with growing milk supplies and said many dairy companies were now looking to reduce milk volumes in a bid to add more value.

A2 milk

One area that Caffyn said Ireland could seek to add more value, was in moving the Irish dairy herd to produce A2 milk, which is milk containing just the A2 protein. A2 milk has grown in popularity in Australia and New Zealand and demand for A2 infant formula is growing rapidly in China.

“While A2 milk is a slightly gimmicky dairy innovation, the A2 milk company has now taken 6% of the Chinese infant formula market in just two years,” said Caffyn. It would take Ireland around five years to transition its dairy herd to producing A2 milk but because Ireland has a relatively small dairy herd in global terms, segregating an A2 milk pool would be easier than in most countries.

When asked about Glanbia’s recent move to launch its ‘Truly Grass Fed’ brand in the US, Caffyn said creating a new brand with considerable scale would be extremely difficult.

Non-GMO milk

Driven by the discounter supermarkets in Germany, Caffyn said non-GMO milk has grown rapidly across Europe. Almost 50% of the milk in Germany is now produced without feed containing GMO, while almost 100% of the milk produced in Austria is GMO free.

Arla is now looking for 100% non-GMO milk from its producers in Denmark, Sweden and Germany by 2020, while French dairy companies Sodiaal and Lactalis are also proposing moves to non-GMO.

“The fundamental issue I have with non-GMO milk is that initially you can sell that milk at a higher price at retail level. That premium is often passed back to the farmer because the farmer will have an added cost in producing non-GMO milk,” said Caffyn.

“However, when the levels of non-GMO milk start to move past 50%, it becomes commoditised and that premium starts to disappear until non-GMO milk becomes the standard that is demanded. Once that premium is eroded, farmers are then left with the higher cost base of producing non-GMO milk.”

On the flip side, if the world is really moving in the direction of non-GMO milk, it’s perhaps better to be proactive and get ahead of the trend, said Caffyn.