Looking through the dairy lens into 2018, you have to be optimistic that the sector can put another good year back-to-back with 2017. The fundamentals are relatively strong. Let’s look at some of them individually.
Looking through the dairy lens into 2018, you have to be optimistic that the sector can put another good year back-to-back with 2017.
The fundamentals are relatively strong. Let’s look at some of them individually.
Product price
The butter market has come down off record 2017 highs but it has settled and is still in a better place than it has been for the last number of years.
There is skim powder in stock which overhangs the market, but a worsening of the drought in New Zealand could affect markets far more significantly.
Overall, the outlook is positive as emerging economies continue to grow and demand more dairy protein. It is likely that we will see some concrete moves by Irish processors to enter the A2 milk or GMO-free product.
A2 milk contains only A2 proteins that some people find easier to digest and may have further health benefits.
Milk supply
Milk supply has increased from some of the big dairy regions in Europe in the last two months as higher prices drive higher volumes.
However, the EU delivery figures for January to October 2016 compared with January to October 2017 show the French supply down 1.2%, the German supply down 1.2%, with the UK only up 0.7%, yet they are still well behind what they produced in 2014 and 2015.
I would envisage Irish supply will continue to rise in 2018 but the extent of this will be dependent on weather and price.
Costs
With the Basic Payment Scheme unchanged, that element of income remains the same for 2018.
Input costs such as oil and feed might be increasing slightly but if the production system is right on farms, these costs should not be game-changers in terms of Irish dairy farmer margins.
Oil prices are still well behind where they have been in the past.
Industry
This year will see a new chair at one of the largest dairy processors, Dairygold, and a chance for LacPatrick and Carbery’s new chairs to settle.
At executive level, we will hear the vision from new boss at price-leading co-op Carbery, while up north, new Dale Farm boss Nick Whelan will get a chance to make further changes aimed at recouping market share.
Ornua (formerly the Irish Dairy Board) will get a new boss as Kevin Lane steps down and hence a new vision for how it will operate in the future must be developed.
Kerry Group and Kerry Co-op should be able to sort out the long-overdue battle on milk price top-ups, but it’s unlikely the Kerry tax problem will be resolved.
Glanbia will discuss with its members the funding and construction of another major milk processing investment to the tune of €300m in the southeast.
Challenges
Environmental challenges will rise higher on the agenda for Irish dairy farmers as more cows mean more challenges. However, we are well ahead of many other large dairy-producing countries in terms of nutrient management.
The aim must be to measure and continue to stay ahead of the rest, with new developments based on the best scientific advice.
Finally, 2018 could be the year that sexed semen gets the necessary push, with a new semen sorting machine landing in Ireland which would undoubtedly help reconnect the beef and dairy sectors.
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