Opinion: We may well hit 30 c/l but what happens after is up for grabs


Darragh Freeman a dairy farmer from Mayo shares his thoughts on the volatile dairy price.

Opinion: We may well hit 30 c/l but what happens after is up for grabs

  • ADDED
  • 4 years ago

Darragh Freeman a dairy farmer from Mayo shares his thoughts on the volatile dairy price.

In a time where milk price is very uncertain we must pose the question is their realistic prospect of milk farmers receiving their breakeven price of 30c in 2017.I will examine the possible trends that dairy farmers may be in store for, opposition to milk price increase and sources of uncertainty.

There has been an upward trend in milk price from July of 2016 and this is a welcome to dairy farmers that are at wits end. Milk price has increased on average of 5.45c/l in this time period from 3.5c/l to 7.5c/l.

At a dairy forum held in early September of 2016 by Minister Michael Creed, Ornua predicted an average milk price at 3.3% protein and 3.6% butterfat of up to 33c/l for 2017. Bearing in mind that most co-ops currently pay around 27.5c/l + VAT (29c/l incl VAT) – a little more in the case of some of the West Cork co-ops and Glanbia, which are either coming close to or exceeding slightly the 30c/l incl VAT barrier – this leaves scope for further increases.

Certainly with increased milk prices will lead to an increase in production. This will result in an increased supply in the market which may hinder milk price increasing somewhat more than 30c/l. Ireland must look further afield for new markets to sell into. This is increasingly important with the impending Brexit and the invocation of Article 50 by the UK Government, which is aimed for March. The effects of Brexit will be at the forefront of farmers minds in 2017 and they have good reason to talk about it. The UK is Ireland’s largest market for food and drink, accounting for 41% of Irish food and drink exports, valued at €4.4bn in 2015. On the flip side Ireland remains the main export market for UK food and drink products, accounting for almost one fifth of trade at €3.1 billion in 2015. Consequences of Brexit to date include fluctuations in Sterling between around 76p for €1 and over 90p for €1. The value of Sterling has a major impact on the value of exports from Ireland to the UK, and our competitiveness relative to imports from non-Euro areas. Bord Bia have confirmed that the weakening of the currency cost Ireland 560 million which Irish farmers haven taken the major brunt of.

Another worrying impact of currency is that it makes UK food imports dearer, which could challenge demand. Around one third of Ireland’s dairy exports go to the UK. The implications of Brexit will lead to increased trade costs, exchange rate volatility, Cost of doing business from increased labour costs and a change in trade deals previously in place. The UK is not a nation Ireland can afford to lose ties with and with its population expected to increase to 80 million the export prospects are immeasurable. To throw a spanner in the works current instability in the north won’t help negotiations between Ireland and the UK.

With the impending inauguration of Donald Trump in the next week me and many others alike can’t help but feel sceptical as regards to the trade deals he will put in place. USA is Ireland’s third largest exporting nation and milk price in Ireland is heavily dependent on this market.

The word volatility is a word becoming more prominent in Irish Dairy farming and farmers are right to be on the side of caution. I think this year will see an improvement on last year and milk price should hit 30c/l . However the Irish Dairy farmer must develop sustainable ways to withstand the good and bad years. In order for the Irish Dairy Industry to remain competitive in the global trade its essential that Ireland moves towards high growth and high revenue products such as infant formula. For sure this year will be a challenge and it will be a year of a lot of “ifs” but Irish farmers must remain positive and resilient.

In a time where milk price is very uncertain we must pose the question is their realistic prospect of milk farmers receiving their breakeven price of 30c in 2017.I will examine the possible trends that dairy farmers may be in store for, opposition to milk price increase and sources of uncertainty.

There has been an upward trend in milk price from July of 2016 and this is a welcome to dairy farmers that are at wits end. Milk price has increased on average of 5.45c/l in this time period from 3.5c/l to 7.5c/l.

At a dairy forum held in early September of 2016 by Minister Michael Creed, Ornua predicted an average milk price at 3.3% protein and 3.6% butterfat of up to 33c/l for 2017. Bearing in mind that most co-ops currently pay around 27.5c/l + VAT (29c/l incl VAT) – a little more in the case of some of the West Cork co-ops and Glanbia, which are either coming close to or exceeding slightly the 30c/l incl VAT barrier – this leaves scope for further increases.

Certainly with increased milk prices will lead to an increase in production. This will result in an increased supply in the market which may hinder milk price increasing somewhat more than 30c/l. Ireland must look further afield for new markets to sell into. This is increasingly important with the impending Brexit and the invocation of Article 50 by the UK Government, which is aimed for March. The effects of Brexit will be at the forefront of farmers minds in 2017 and they have good reason to talk about it. The UK is Ireland’s largest market for food and drink, accounting for 41% of Irish food and drink exports, valued at €4.4bn in 2015. On the flip side Ireland remains the main export market for UK food and drink products, accounting for almost one fifth of trade at €3.1 billion in 2015. Consequences of Brexit to date include fluctuations in Sterling between around 76p for €1 and over 90p for €1. The value of Sterling has a major impact on the value of exports from Ireland to the UK, and our competitiveness relative to imports from non-Euro areas. Bord Bia have confirmed that the weakening of the currency cost Ireland 560 million which Irish farmers haven taken the major brunt of.

Another worrying impact of currency is that it makes UK food imports dearer, which could challenge demand. Around one third of Ireland’s dairy exports go to the UK. The implications of Brexit will lead to increased trade costs, exchange rate volatility, Cost of doing business from increased labour costs and a change in trade deals previously in place. The UK is not a nation Ireland can afford to lose ties with and with its population expected to increase to 80 million the export prospects are immeasurable. To throw a spanner in the works current instability in the north won’t help negotiations between Ireland and the UK.

With the impending inauguration of Donald Trump in the next week me and many others alike can’t help but feel sceptical as regards to the trade deals he will put in place. USA is Ireland’s third largest exporting nation and milk price in Ireland is heavily dependent on this market.

The word volatility is a word becoming more prominent in Irish Dairy farming and farmers are right to be on the side of caution. I think this year will see an improvement on last year and milk price should hit 30c/l . However the Irish Dairy farmer must develop sustainable ways to withstand the good and bad years. In order for the Irish Dairy Industry to remain competitive in the global trade its essential that Ireland moves towards high growth and high revenue products such as infant formula. For sure this year will be a challenge and it will be a year of a lot of “ifs” but Irish farmers must remain positive and resilient.

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