End of expansion ups ante on adding value to milk - Ornua

Ornua chief Conor Galvin maintains that the dairy processing sector can derive further growth in the value generated from its milk pool, despite 2023’s decline in volumes.

The head of the Kerrygold manufacturer stated that this value can be added by focusing processing output on high-value products, such as butters, formulas and cheese, in the sector’s new post-expansion era.

However, this value will only be found in the marketplace if Ireland rises to the “challenge” of preserving the grass-fed model of dairy farming, despite nitrates and regulatory pressures, he said.

Galvin outlined that the processor’s co-op handles about 50% of the national milk pool with the aim of adding value to ultimately maximise the milk price appearing on farmer supplier’s cheques, when he spoke at a major Irish Farmers' Association (IFA) conference on Thursday.

Supplies slowing

“Since 2023, our volumes have started to flatten off and we live in a world where the phase of expansion we saw after the lifting of quotas has started to slow down and we are now looking for value.

“We are really looking for value in the product and how we can make more from the same milk pool.”

Galvin put the reason for the slowdown in milk deliveries last year and to date in 2024 down to successive years of difficult weather, higher milk production costs and tighter margins along the processing supply chain.

“They have all affected the supply of milk, the processing of milk and the sale of product into the market, but we are facing those challenges head on and bringing certainty back into the returns from the market is critical to give you the certainty to keep producing that milk,” he told farmers.

“Looking forward, I think the outlook on supply is that that we would see supply being affected significantly by genetics, by herd management, but also by economics and we have to make sure that all the stars align there so we protect what we have.”

The processor chief stated that “very low single-digit changes” to milk supplies are forecast over the coming five years, which will no way resemble the 5% increase witnessed during the expansion heyday.

Bord Bia challenged

Also speaking the event was Bord Bia CEO Jim O’Toole, who referenced the body’s moves to update its farmers quality assurance schemes.

“One of those trends which is becoming increasingly apparent, as you well know, is the absolute growth right across continental Europe and further afield on having evidence and data on the quality, the traceability, the standards at which farming is undertaken,” O’Toole said.

The CEO maintained that this crowded arena of farmer assurance schemes is one “in which we can compete well because we have strong standards and they are well-implemented”.

IFA livestock chair Declan Hanrahan challenged O’Toole on the respective beef price differentials of €1/kg and 50c/kg between Ireland and UK and EU markets currently, despite the farmer quality assurance scheme.

“We are always told our heifer and steer beef is premium product, but we have young bull beef that Europe is awash with this morning trading in excess of our high-quality product,” Hanrahan said.

Bord Bia’s CEO responded that: “There is a gap in that price because the UK is a deficit producer and some of the top-paying customers have a UK-only policy, but we are in a strong position to be the single-largest imported supplier and getting us a significant premium to that.

“We have been running quality for as long as Bord Bia has been around and our objective has always been to make it as farmer-friendly as possible.

“The reality of the world is that it is competitive and the people we are competing against have quality assurance programmes to varying degrees and our customers around the world have standards and they are seeking verification.”