Dairy Industry Ireland (DII) has indicated that they are in the process of exploring an impact assessment on the economic consequences of the new 220kg N/ha nitrates limit and possible further reductions.
DII director Conor Mulvihill told the Irish Farmers Journal that the Government has signed off on a major policy change without any apparent understanding of the consequences of that decision, or, if they do, they aren’t prepared to share this with farmers and the industry.
DII are now looking at commissioning a piece of work that will project what the economic consequences will be of not just reducing the 250kg N/ha upper-limit to 220kg N/ha, but what the consequences would be if it was reduced further to 170kg N/ha or, indeed, if the derogation was lost completely.
It is only a few weeks since DII published a report they commissioned from Ernst & Young (EY). This report was a snapshot of the impact of dairying on the Irish economy in what admittedly was an exceptional record year in 2022.
It showed that the wider economic impact of the Irish dairy sector to the overall economy was put at €17.6bn.
This includes the direct impact of buying and processing milk, plus the knock-on effect in the wider economy from ancillary activities, ranging from the local co-op supplying farmers to transport of finished goods to 120 markets across the world and everything in between.
As well as the 15,600 farmers, the industry has 5,651 people directly employed in dairy processing and EY estimates that dairy processing supports 53,930 full-time equivalent jobs and wages of €1.7bn.
EY also considered what the prospects were for the industry in 2030, based on the circumstances prior to the reduction in the nitrates ceiling being confirmed.
Using information supplied by the processors, EY calculated that even with the requirement to achieve a 25% emissions reduction from agriculture, the sector would deliver a compounded annual growth rate (CAGR) of 0.6% by 2030 – CAGR had been running at 4% since 2018.
This translates into a 5% increase in milk volumes to 9.2bn litres in 2030, though with less dairy farmers. EY projected a reduction from 15,600 to 15,200 farmers, and the average herd size growing to 100 cows in 2030 compared with 90 in 2022.
After over a decade of uninterrupted growth, the dairy processing sector has announced factory closures and job losses in recent weeks.
The first shock was that Wyeth is shutting down what would have been thought of as a lucrative business, but it turns out the product it made is no longer wanted to the extent it once was.
This was followed by Lakeland announcing that they are rationalising their business with the closure of three sites and 78 job losses.
Given the multiple locations of their business following their acquisitions of Fane Valley and former LacPatrick sites, there is, no doubt, strategic logic in doing so, and replacing them with a new factory in Co Cavan.
The EY report had identified a further expected investment of €865m of capital expenditure through to 2027, of which €191m is targeted at climate action and sustainability initiatives.
This is in addition to the €1.6bn of capital expenditure between 2015 and 2022 to handle the extra 3.1bn litres of milk produced.
After more than a decade of growth since it became known that milk quotas were ending, the Irish dairy sector is again entering a period of uncertainty and a fear of returning to the decades of stagnation that followed quota introduction in 1984.
Ambitions had already been curtailed with the requirement for emissions reductions, and this is added to with the new 220kg N/ha ceiling. This already impacts over 2,000 farmers, which will increase next year, and there are fears that the ceiling could be reduced further.
Existing work by EY shows the cumulative impact of dairy to the Irish economy was €17.6bn in 2022, but there is no idea what the economic consequences of the changes to the nitrates limit will be.
DII may undertake this work now, but at best, it means that we are informed of the consequences after the event.
An economic impact assessment should have been done by the Department in advance of such a major policy change, and shared with farmers and processors.