What is your outlook for milk prices?
We are in a good state right now because the global market is fairly balanced. I don’t see a lot of downside risk. We have a fairly balanced situation right now in the global market.
FrieslandCampina just increased its milk price to over 40c/kg, which is the benchmark price for western Europe.
I don’t see a downward adjustment in dairy markets before the second quarter of 2018 (June 2018). There is some risk with Oceania increasing supply for its 2018 milking season as well as weak buying power in the oil economies.
Will high prices result in
over-production?
Farmers are being paid good prices right now and eventually that will generate more milk than the market can absorb.
But I don’t see that happening for another two quarters. France and Germany have been particularly slow changing from a contraction in milk supply to growth again even though prices are above breakeven.
The downturn in 2015-2016 was particularly long and deep and it surprised me how long it has taken for farmers to regain their confidence to develop an investment mindset again.
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How will phosphate limits impact Dutch production growth?
I do think we will continue to see growth in Dutch milk production, but just not to the extent we’ve seen from 2014 to 2016. There is a risk that we may see some stronger policy guidelines or limits to how much growth we can achieve within this phosphate regime going forward. But never underestimate the entrepreneurship of Dutch farmers.
What products should the Irish industry process our milk into?
A country that grows production needs to move its product mix up the valorisation pyramid (value chain).
If you grow at the kind of pace that Irish milk production is growing at its not possible to immediately push every new kilogramme of milk into the top of that valorisation pyramid.
But Ireland shouldn’t just aim for the low-hanging fruit at the bottom of the pyramid. I always say that just because you can make a living at 28c/l to 30c/l doesn’t mean the Irish industry should have to settle for this.
Is seasonal production a challenge to getting better market returns?
I don’t really think so.
Seasonal production has its pros and cons. It keeps you away from certain markets but it also gives you a head start in other markets.
Personally I think grass based dairy farming is a good way to go. It’s not a bad thing that you have a couple of months where your factories are not 100% utilised. The pros really outweigh the cons in Ireland’s situation.
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