Dairy Day 2017: The Key Takeaways

Frawley/Neville

The Irish Farmers Journal hosted National Dairy Day last Thursday (23rd November) in Punchestown Event Centre, Co. Kildare. As the end of 2017 nears with a projected milk volume growth of 7%, equating to 7.1 billion litres, the event’s theme focused on the opportunities and challenges that have arisen with the extra raw material.

In attendance were dairy farmers, agribusiness professionals, industry stakeholders / leaders, government officials and industry lobby groups.

Key messages centred around Irish and global dairy markets, sustainability, Origin Green – the importance of SDAS auditing, issues of overproduction and retail supermarket dominance.

This article aims to deliver a brief synopsis of the event as experienced on the day.

National/International Market Trends

National

  • There is a concentration of dairy processors within Ireland: Multiple processors competing means a lowering of value and prices
  • Scenario of a new processor could emerge for Ireland, inspired by what is seen happening in New Zealand – Craig Bell (Director of Leitissimo)
  • “My impression is Ireland has a global market, Ireland and New Zealand are not that dissimilar – you’ve a lot of liquid sunshine here!” – Craig Bell

International

  • Brazil is not meeting its own dairy demands and continues to import
  • Argentina and Uruguay: policy to supply domestic liquid milk market first and export second means they have weaker exports
  • Africa: an emerging economy with more money to spend
  • Asia: has a strong demand for protein with food safety as first priority
  • Global dairy product consumption will grow by 1.8% annually over next 10 years with highest growth rate expected in Asian countries
  • China is Ireland’s second largest export market for dairy products in value terms. More Irish milk will be dried into powders for the Asian market, this will mean a change in milk price calculations
  • Main destinations for EU Butter are USA, Saudi Arabia, Iran and China

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Differentiating Irish Dairy Produce

Origin Green – How to tell the Irish story to an International Market

  • “Main point of differentiation for Irish dairy products in global markets is sustainability” – Tara McCarthy (CEO of Bord Bia)
  • The next phase of Origin Green is Bord Bia’s focus – advising farmers to analyse their data from SDAS to reduce greenhouse emissions
  • Data, audits and accreditation are crucial to selling the origin green story (brand image of Ireland) internationally
  • Origin Green is a genuine story about Ireland’s commitment to sustainability and food security
  • This story must be backed by statistics like percentage of grass fed and number of days outdoors grazing to earn credibility
  • “A lot of people we spoke to in Japan didn’t know where Ireland was – whereas they knew where New Zealand was, so we have to make sure we tell our story with the facts and figures” – Tara McCarthy

Powder Commodities and the Challenge of Differentiation

  • For Butter, Kerrygold commands a premium in every market. Irish dairy powders lack the same differentiation Kerrygold has achieved for the butter commodity
  • The question remains; how do processors differentiate milk powders
  • There are two elements at play, the science/innovation (in extracting the maximum nutrient value) and the logistics (infrastructure for powder drying capacity). The winners of the heightened milk flow will need to invest in capacity while also moving up the value chain

Environmental Focus

Dairy Sector needs to manage problem of overproduction

  • Operators must make their business decisions based on market signals
  • To defend the CAP at the European budget negotiations (currently amounting to €59 billion annually) – Commissioner Hogan, “cannot enter the negotiations with 500,000t [of SMP] in storage”.
  • He reminded attendees of the unfortunate reality his predecessor Ray McSharry faced; SMP mountains and wine lakes.

New model for Common Agricultural Policy (CAP)

  • Future of the CAP: next week Commissioner Hogan will announce a new model for results delivery
  • This CAP model will outline strong environmental and climate change targets while providing flexibility nationally to get it done.
  • A ‘one size fits all’ method is to be avoided; history shows that the enemy of environmental performance goals is a top down approach
  • Farmers urged to stay within the footing of the Nitrates and Water framework directive, learn from Dutch derogation (costing the Dutch Dairy Industry €1bn) and their phosphate problem (leading to the slaughter of 50,000 cows)

 

Retail Supermarket Dominance

  • In Ireland: five supermarkets/discounters control 90% of grocery market
  • Irish retail industry was reluctant to increase butter prices despite the commodity value nearly doubling this year
  • The European Commission for Agriculture and Rural Development is to publish a proposal tackling unfair retail trading practices
  • Commissioner Hogan stated the necessity of a strong political campaign from stakeholders to, “get this proposal over the line” as, “everybody in this room has skin in the game”.