The abolition of quota and subsequent growth in dairy has delivered real dividends. It has allowed established herds expand and cleared a pathway for new entrants to increase farm profitability. According to Teagasc, the growth opportunity has seen output significantly increase but net margin remain static while debt, on a milk solids basis, has reduced by almost 50% on average.
A number of factors contributed to the growth strategy. Latent potential at farm level and a processing sector prepared to invest in capacity played a central role. So, too, did an evolving global dairy market where demand was growing at 1.5-2% per annum. However, it would be foolish for any future growth strategy not to recognise the extent to which a 50% increase in dairy output has dramatically changed the landscape – at farm, processing and policy level.
International warnings
In a period of continuous growth, the future strategy must always evolve to recognise the extent to which growth itself changes the production landscape. We only have to look to New Zealand, the Netherlands and Northern Ireland to see the consequences of continually growing dairy output without recognising the wider consequences.
In all three regions, a production handbrake has been introduced through a range of measures, including a reduction in stocking rate and nitrogen use alongside restrictive planning regulations on new units. This is because the expansion of the dairy sector in these countries has come at the expense of water quality and biodiversity loss.
As we grow further, so will our exposure to commodity markets ... there can be no letup in our focus on costs and efficiency
From an Irish perspective, it is critical that the same does not happen here. We must ensure the pathway for future growth remains open. Achieving this will require an acceptance that the growth strategy of the past five years will have to change at farm and processing level.
At processing level, a funding model for additional capacity that does not curtail new entrants but reflects the diverging pace at which growth is taking place across suppliers is required. Ensuring that costs are minimised through a commitment to centralised processing and marketing should be the starting point.
Meanwhile, a model that allows new entrants a phased investment in their cooperative to a level aligned to the average herd size across the supplier base makes sense.
A mature discussion will also be required on market demand and milk price. Further growth will see the percentage of total product sold into premium markets decline. The rate of premiumisation over the past five years has not kept pace with volume. Therefore, as we grow further, so will our exposure to commodity markets. To remain profitable in this environment, there can be no letup in our focus on costs and efficiency.
Growing pains
The challenge at farm level starts with tackling the growing pains experienced over the past five years. These issues are coming more to the fore as an increasing number of dairy farmers realise that enhancing environmental and animal welfare standards is key to future growth.
The ongoing IFA meetings on managing dairy calves is to be welcomed and needs to be built upon. Central to the current and future growth strategy has to be a plan to ensure there is an economically viable model to bring dairy-bred calves through to beef. Sexed semen has a role and we need AI companies to embrace this technology rather than provide obstacles that limit usage.
We cannot afford any grey areas in relation to animal welfare – regulations need to be enforced by the Department of Agriculture and where breaches are identified, appropriate and swift action taken.
Consumer expectations
At the same time, farm practices must be totally aligned to consumer expectations in terms of welfare and environmental compliance, while less consumer-facing issues around the availability of skilled labour will play a central role in delivering on future growth ambitions.
Too often we hear calls for forums to be hastily convened against a backdrop of a crisis in the sector. But at this point we have an opportunity to establish a stakeholder forum charged with developing a strategy for a dairy sector that continues to look at the horizon of opportunity.
Key to maintaining this positive horizon will be an acceptance that, as an industry, we need to continually identify, take responsibility for and tackle the challenges as they arise along the growth journey. Failing to do so will undoubtedly see the future of the sector shaped not by ambition but increased regulation.
Readership survey: a strong and trusted voice for farmers and rural communities
The independent TGI survey shows weekly readership of the Irish Farmers Journal increased by 8,000 in 2019 – the fastest growing readership in any newsprint publication in the country.
With a weekly readership of 263,000 in the Republic of Ireland, the Irish Farmers Journal ensures farmers and rural communities continue to have a strong voice. I would like to thank all our readers for their continued support and welcome feedback on how we can further improve both our print and digital offerings.
Tillage: sun a welcome relief as field work continues
Harvesting soya beans near Castlerdermot in Co Kildare. \ Philip Doyle
The recent fine spell has been very welcome on tillage farms, for both harvesting and planting.
However, the benefits have been variable around the country. Some growers on lighter soils now have almost all of their revised winter area planted but many others have no more than 10% of their intended winter area in the ground.
It now seems inevitable that the overall area of winter cereals will be down significantly, with a reduction in the order of 40-50% of last year’s area possible unless the spell of good dry weather continues.
This is especially critical for the heavier soils where winter cereals are more prominent.
Animal Health Ireland: celebrating 10 years of success
After 10 years in existence, Animal Health Ireland (AHI) has delivered in spades. It has brought low-cost, well-chosen priorities and a process that includes all players in the industry: farmers, vets, civil servants and administrators, as well as politicians. Tapping into overseas expertise and programmes has created a unique model.
As chair Mike Magan put it, AHI was looking for 10-to-one return on any investment made. Already the almost-achieved eradication of BVD has more than justified the organisation. Minister Michael Creed put the annual return from the BVD programme at €87m per year.
At the 10-year celebrations on Wednesday, tributes from the European commissioner for health and food safety were fully justified.
A recurring reference was made to the physical and emotional strain on farmers of having sick animals and diseased herds.
Food production: meat and dairy - communicating the facts
Also in this week’s edition, we carry a piece from the six industry stakeholders that have come together to help communicate the facts in relation to meat and dairy production in Ireland.
It is a much needed development in a world where consumers are not only becoming increasingly disconnected from how their food is produced, but are constantly being exposed to both environmental claims and nutritional advice that is based on neither fact nor science.
The abolition of quota and subsequent growth in dairy has delivered real dividends. It has allowed established herds expand and cleared a pathway for new entrants to increase farm profitability. According to Teagasc, the growth opportunity has seen output significantly increase but net margin remain static while debt, on a milk solids basis, has reduced by almost 50% on average.
A number of factors contributed to the growth strategy. Latent potential at farm level and a processing sector prepared to invest in capacity played a central role. So, too, did an evolving global dairy market where demand was growing at 1.5-2% per annum. However, it would be foolish for any future growth strategy not to recognise the extent to which a 50% increase in dairy output has dramatically changed the landscape – at farm, processing and policy level.
International warnings
In a period of continuous growth, the future strategy must always evolve to recognise the extent to which growth itself changes the production landscape. We only have to look to New Zealand, the Netherlands and Northern Ireland to see the consequences of continually growing dairy output without recognising the wider consequences.
In all three regions, a production handbrake has been introduced through a range of measures, including a reduction in stocking rate and nitrogen use alongside restrictive planning regulations on new units. This is because the expansion of the dairy sector in these countries has come at the expense of water quality and biodiversity loss.
As we grow further, so will our exposure to commodity markets ... there can be no letup in our focus on costs and efficiency
From an Irish perspective, it is critical that the same does not happen here. We must ensure the pathway for future growth remains open. Achieving this will require an acceptance that the growth strategy of the past five years will have to change at farm and processing level.
At processing level, a funding model for additional capacity that does not curtail new entrants but reflects the diverging pace at which growth is taking place across suppliers is required. Ensuring that costs are minimised through a commitment to centralised processing and marketing should be the starting point.
Meanwhile, a model that allows new entrants a phased investment in their cooperative to a level aligned to the average herd size across the supplier base makes sense.
A mature discussion will also be required on market demand and milk price. Further growth will see the percentage of total product sold into premium markets decline. The rate of premiumisation over the past five years has not kept pace with volume. Therefore, as we grow further, so will our exposure to commodity markets. To remain profitable in this environment, there can be no letup in our focus on costs and efficiency.
Growing pains
The challenge at farm level starts with tackling the growing pains experienced over the past five years. These issues are coming more to the fore as an increasing number of dairy farmers realise that enhancing environmental and animal welfare standards is key to future growth.
The ongoing IFA meetings on managing dairy calves is to be welcomed and needs to be built upon. Central to the current and future growth strategy has to be a plan to ensure there is an economically viable model to bring dairy-bred calves through to beef. Sexed semen has a role and we need AI companies to embrace this technology rather than provide obstacles that limit usage.
We cannot afford any grey areas in relation to animal welfare – regulations need to be enforced by the Department of Agriculture and where breaches are identified, appropriate and swift action taken.
Consumer expectations
At the same time, farm practices must be totally aligned to consumer expectations in terms of welfare and environmental compliance, while less consumer-facing issues around the availability of skilled labour will play a central role in delivering on future growth ambitions.
Too often we hear calls for forums to be hastily convened against a backdrop of a crisis in the sector. But at this point we have an opportunity to establish a stakeholder forum charged with developing a strategy for a dairy sector that continues to look at the horizon of opportunity.
Key to maintaining this positive horizon will be an acceptance that, as an industry, we need to continually identify, take responsibility for and tackle the challenges as they arise along the growth journey. Failing to do so will undoubtedly see the future of the sector shaped not by ambition but increased regulation.
Readership survey: a strong and trusted voice for farmers and rural communities
The independent TGI survey shows weekly readership of the Irish Farmers Journal increased by 8,000 in 2019 – the fastest growing readership in any newsprint publication in the country.
With a weekly readership of 263,000 in the Republic of Ireland, the Irish Farmers Journal ensures farmers and rural communities continue to have a strong voice. I would like to thank all our readers for their continued support and welcome feedback on how we can further improve both our print and digital offerings.
Tillage: sun a welcome relief as field work continues
Harvesting soya beans near Castlerdermot in Co Kildare. \ Philip Doyle
The recent fine spell has been very welcome on tillage farms, for both harvesting and planting.
However, the benefits have been variable around the country. Some growers on lighter soils now have almost all of their revised winter area planted but many others have no more than 10% of their intended winter area in the ground.
It now seems inevitable that the overall area of winter cereals will be down significantly, with a reduction in the order of 40-50% of last year’s area possible unless the spell of good dry weather continues.
This is especially critical for the heavier soils where winter cereals are more prominent.
Animal Health Ireland: celebrating 10 years of success
After 10 years in existence, Animal Health Ireland (AHI) has delivered in spades. It has brought low-cost, well-chosen priorities and a process that includes all players in the industry: farmers, vets, civil servants and administrators, as well as politicians. Tapping into overseas expertise and programmes has created a unique model.
As chair Mike Magan put it, AHI was looking for 10-to-one return on any investment made. Already the almost-achieved eradication of BVD has more than justified the organisation. Minister Michael Creed put the annual return from the BVD programme at €87m per year.
At the 10-year celebrations on Wednesday, tributes from the European commissioner for health and food safety were fully justified.
A recurring reference was made to the physical and emotional strain on farmers of having sick animals and diseased herds.
Food production: meat and dairy - communicating the facts
Also in this week’s edition, we carry a piece from the six industry stakeholders that have come together to help communicate the facts in relation to meat and dairy production in Ireland.
It is a much needed development in a world where consumers are not only becoming increasingly disconnected from how their food is produced, but are constantly being exposed to both environmental claims and nutritional advice that is based on neither fact nor science.
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