Bergin has lots to say about derogation, dairy and leadership

Jim Bergin, CEO of Tirlán, recently sat down for an extensive interview with the Irish Farmers Journal.

He had a lot to say on the nitrates derogation, the state of the dairy industry in Ireland and the future for milk prices.

“This year, we have seen terrible weather with a very wet start and end to the season and a drought in the middle of the year.

“We have seen an historic reduction in the price of milk.

“And, yet, the topic that is occupying 80% of the meetings we have with farmers is sustainability, and in particular, derogation,” Bergin said.

“They are reaching out for help.”

Bergin, obviously very frustrated at the confusion and uncertainty among his farmer suppliers, said “there is a requirement for a JFK moment here. We, the dairy industry, are weaker because we are fragmented. This issue needs singular clarity, it needs somebody saying ‘I am determined to maintain our derogation’ and ‘here is what I’m putting behind it’.

“As it stands at the moment, we are getting the ‘we are fully committed to the derogation’ but there’s not enough behind it.” [Bergin clarified that the JFK moment he was referring to was the president’s moon speech in 1961].

“We have a two-year urgency here now where the best and smartest farmers in the country are worried and confused. We need a body of people to lead those farmers and to help them.

“Derogation is about water quality. It is about rivers and estuaries, so any solution has to be catchment-centric, and farmer-centric. The issue is that the necessary change management, or transition leadership, which is needed to help people along is being missed at Government level and at policy level.”

Bergin says that farmers are not experts in nutrient management planning or water quality plans.

If they got the help needed to understand what the issues on their own farms are, then they could be confident they are making the correct changes, and the necessary improvement in water quality would follow.

“Our belief is that if the derogation is lost, it is catastrophic for rural Ireland,” Bergin says, “so, what would you invest now to prevent that catastrophic loss? From my point of the view, what we’re seeking is the resources to put on the ground, to work on a one-to-one basis with farmers to explain the regulations, to develop a plan and to encourage the farmer to follow that plan.”

Social licence

“The bottom line here is that we have no choice. Number one, we have to do the right thing as it is about our social licence – water is the most tangible factor of the environment – so we have to do the right thing but, secondly, we have to optimise our position in relation to the derogation to safeguard our futures and the future of rural Ireland.”

Adding to the urgency, Bergin says, is that the test period for water quality is from 2022 to 2024, meaning there is only one year left.

However, he points out that this means the current closed period is the last of the current base period. This means it is critical that farmers are in compliance throughout this closed period.

“That’s a big ask, considering the year we’ve had. But our case has to be really, really genuine.

“Twenty-seven countries have to sign off on Ireland’s derogation. The unique elements of our grass-based system and our dependence on agriculture have to be called out, as well as showing genuine progress and effort.”

Despite forecasts of a drop in milk output both in Ireland and globally, Bergin remains cautious about the outlook for dairy prices.

“We see that the end-user consumption remains fragile.

China is weak and Southeast Asia is relatively weak, so therefore the whole thing is being driven by the supply side.

“We have an easing off of supply, particularly in South America at the moment, and that’s helping to produce some kind of balance. In the internal EU market, even countries that were driving on like Germany and the Netherlands, they’re down as well, in addition to France, Ireland and the UK.”

Bergin makes the point that, historically, 33c/l was a decent price off the cost-base that existed previously. Now there is a requirement to be at 40c/l, at least in order to meet current costs.

“But 40 is a cent higher than the world had ever paid, going to back to 2013. 39c/l was the highest we ever had and before that, the average was 30c/l to 32c/l.

And that is what the world can afford to pay. That’s the real issue – an inflated cost base set against a price that the world, particularly the developing world, cannot afford to pay.”

When asked if this means that Irish dairy farmers can expect another bad year for milk prices, Bergin counters by suggesting that 2023 wasn’t actually that bad a year for the dairy industry.

“In 2022, we have a phenomenal year. 2023, from a practical point of view, has been incredibly tough but from a milk price point of view, our average actual milk price for the year will be somewhere around 43 c/l.

That number, relative to the cost base, is better than it might have been. It has enabled us to get through this year and for farmers to wash their face.

“Ending up at 33 c/l relative to where the costs are, you would say is catastrophic, but the average through the year, when you add it all up, could have been worse.

“And if we go into next year and markets recover to the extent that is projected, then over the three years we will have managed to stay above the inflationary base. We will have to see what next year delivers, but if it shapes up the way it looks like it is shaping up, then we should be ok.”

As part of keeping up to date on everything, Tirlán regularly surveys its farmer suppliers.

The latest census, which was completed in recent months shows that focus for dairy primary producers is shifting from increasing cow numbers to increasing productivity and efficiency.

When it comes to investments, the number one plan for farmers is for solar panels with 52% intending to invest in solar with around 80% of installations coupled with a battery, meaning that farmers can choose to store energy for later use.

Tirlán’s milk pool has expanded 95%

Bergin says that overall, what Tirlán is seeing with on-farm investments is a move towards consolidation following a period of rapid expansion.

“Tirlán’s milk pool has expanded 95%. When an industry is expanding at a rapid pace, it is not able to do everything to consolidate the business.

“Going through that expansion, you get the fundamentals of cow numbers, milking parlours, sheds and roads right. Now, there is a chance to catch up on everything else. Not to say that these things are peripheral, but rather that they are part of the necessary consolidation that follows a period of rapid expansion.”

One point of difficulty for the dairy sector that was highlighted in the census was the scarcity of labour. A significant proportion of dairy farmers have no relief milker, a situation which Bergin says is not sustainable. He says that they have lobbied for more visas to be made available for the industry to meet the clear need.

Just as Irish dairy farmers are in a period of consolidation following the rapid expansion, so are Irish dairy processors.

Tirlán’s new cheese plant, which is on target to be commissioned in the first three months of 2024 will take 400m litres of milk next year and then 500m litres per year thereafter. The main source of that extra milk for the cheese plant will be Tirlán.

“We will be repatriating milk that we were supplying to others,” Bergin explains. “We had significant contracts with other processors. Dairygold and Lakeland were two big ones. That milk will be the majority of it, and we will have some growth ourselves from productivity.”

Bergin also confirmed that Tirlán is open for new dairy entrants. Asked whether he would talk to dairy farmers currently supplying other processors, he said that there is a charter within the Irish Co-operative Organisation Society (ICOS) that proper notice would be given and that any supply contracts would be honoured.

However, he did add that “within the context of all of that, we are in business, so we are open-minded, and we will play by the rules”.

Asked as to whether he would talk to a producer group that was coming to the end of its contract with a processor he again said, depending on the suitability and the circumstances, and within the rules “sure, yes.”