As an agricultural economist, it is hard to mourn the passing of supply constraints such as milk quotas. They represented everything that was wrong with CAP in the 1980s. Rather than tackling the root cause of the milk lakes that formed in Europe, the artificially high prices only dealt with the symptoms and the subsequent oversupply.

Fortunately, CAP and the dairy sector have moved forward considerably since this time and at last quotas are going, although apparently not without the irony of one last superlevy fine.

Within discussions about the future beyond quotas, much is made of the natural advantage that our grass-based system gives us; in the dairy system, our ability to grow grass gives us a comparative advantage, but innovation can give us a competitive advantage.

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Competitive advantage

This suggests that having a comparative advantage in grass is unlikely to be enough. It is what we do to maintain and enhance this advantage that is of most importance.

In this sense innovation is not a vague notion. It is about thinking creatively about how we can either reduce the cost of production (through the entire supply chain) or raise the value of the products that we are producing – either way ensuring that we secure and maintain a competitive advantage over economic rivals in the sector.

Conflicting calls for the future development of the industry can be heard. On one side, we should be the lowest-cost supplier of bulk products. On the other hand, the purveyor of niche high-value products.

Conundrum

In this there lies a conundrum, as it is often said of businesses that you should strive to be either the lowest-cost supplier or the highest-value and that being caught in the middle is often fatal. Whichever direction is taken, a culture of innovation needs to be nurtured.

At the most basic level, our innovation challenge is about the lack of uptake of available technologies and improved practices (milk recording, grass management) on-farm. Farm structures, age profiles and lack of land mobility are seen as significant barriers to innovation.

The recently announced dairy processing technology centre should enable efficiencies in the processing sector to be realised and can be seen as an innovative collaboration between a number of processors, Government agencies and academia. Animal Health Ireland (AHI) and ICBF are great examples of collaboration and cooperation between partners.

Data

Through the supply chain, one area that would seem to offer the opportunity to improve competitiveness is of innovation in data management.

It is clear that more and more data is being collected from all parts of the chain (animals, bulk tanks, feeding machines, etc). In a recent paper from the Netherlands, it is argued that this, potentially, has the ability to change farming as dramatically as mechanisation or the introduction of pesticides and artificial fertilizers did.

At the present time, farm data is still rarely shared with advisers or the processing industry, analysed by intelligent software or combined in regional analysis and advice.

Finally, if through innovation we are able to turn our comparative advantage into a competitive advantage and the industry grows significantly, then it is likely that at some point in the near future we will come up against physical and environmental constraints and innovation will be needed to help us overcome them.

Perhaps we need to be thinking ahead as to how we will deal with these sorts of issues in Ireland in the future.