The collapse in market demand caused by COVID-19 could see farmgate milk prices slashed by as much as 20% this year and wipe €840m off Irish milk cheques, according to a sobering new report produced by business advisory firm EY.
The Irish Farmers Journal has learned of an in-depth report that was commissioned by Dairy Industry Ireland (DII) and prepared by EY, which warns of the potential disastrous impact that COVID-19 could have on Ireland’s dairy industry.
Milk prices
According to the EY report, the fall in market demand caused by COVID-19 could see Irish farmgate milk prices fall anywhere between 10% and 20% this year, which would wipe a massive €840m off farmer milk cheques in a worst-case scenario.
Based on the current milk price of around 30c/l, this would see milk prices slashed by between 3c/l and 6c/l.
The EY report states that Ireland’s dairy industry is worth €11.3bn annually to the Irish economy and supports almost 46,000 people in direct and indirect employment.
However, EY’s research suggests that COVID-19 could see output from the Irish dairy industry collapse by as much as €2.3bn in the short term due to the fall in market demand, as well as potential losses in milk processing capacity.
Disruption
EY’s report found that infection to just a small number of 150 key workers in the industry could lead to major processing disruption.
The dairy industry is calling for priority testing for key technical employees to allow them to return to work as quickly as possible in the event of any coronavirus outbreaks in processing plants.
EY’s report also forecasts that as many as 10,700 full-time equivalent jobs could be lost as a result of the downturn in the Irish dairy industry due to COVID-19.
Mitigate
In order to mitigate this damage, the EY report says that urgent measures are needed to support dairy markets in the short and medium term in order to protect farmers, dairy processors and the overall rural economy in Ireland.
The report states that private storage aid (PSA) should be introduced as a matter of urgency in order to “address the market imbalance”.
EY also suggests that the Irish Government and the European Commission could help limit the exposure of Irish dairy companies by underwriting extensions to existing export credit insurance, now allowed under EU competition law.
Exports
Irish dairy processors export 92% of all products they produce, meaning the sector has a significant exposure to global markets worst affected by COVID-19.
The EY report found that more than three-quarters (76%) of Irish dairy export volumes are shipped to countries in the top 15 most-affected COVID-19 countries.
The EY report also states that Irish dairy processors will need an additional €550m in Government-driven working capital in order to assist processors deal with increases in storage costs as a result of less product being exported. This would likely take the form of low-interest loans for large businesses.
The report highlights in stark terms the threat facing the Irish dairy processing industry
“The report highlights in stark terms the threat facing the Irish dairy processing industry, as well as farmers and the rural economy, without national and EU supports,” said DII director Conor Mulvihill.
“The Minister for Agriculture Michael Creed and his team have engaged in Trojan work in seeking to activate EU supports to the industry, but this report clearly shows that far more needs to be done to protect the industry at national and EU level,” he added.
Mulvihill added that the Irish dairy industry is an engine of the rural and national economy and it is vital that the necessary steps be taken quickly to enable the industry to be in a position to contribute to the national economic reboot when it occurs.
Read more
Dairy markets on the brink as COVID-19 devastates all before it
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Irish co-ops prepare for intervention
The collapse in market demand caused by COVID-19 could see farmgate milk prices slashed by as much as 20% this year and wipe €840m off Irish milk cheques, according to a sobering new report produced by business advisory firm EY.
The Irish Farmers Journal has learned of an in-depth report that was commissioned by Dairy Industry Ireland (DII) and prepared by EY, which warns of the potential disastrous impact that COVID-19 could have on Ireland’s dairy industry.
Milk prices
According to the EY report, the fall in market demand caused by COVID-19 could see Irish farmgate milk prices fall anywhere between 10% and 20% this year, which would wipe a massive €840m off farmer milk cheques in a worst-case scenario.
Based on the current milk price of around 30c/l, this would see milk prices slashed by between 3c/l and 6c/l.
The EY report states that Ireland’s dairy industry is worth €11.3bn annually to the Irish economy and supports almost 46,000 people in direct and indirect employment.
However, EY’s research suggests that COVID-19 could see output from the Irish dairy industry collapse by as much as €2.3bn in the short term due to the fall in market demand, as well as potential losses in milk processing capacity.
Disruption
EY’s report found that infection to just a small number of 150 key workers in the industry could lead to major processing disruption.
The dairy industry is calling for priority testing for key technical employees to allow them to return to work as quickly as possible in the event of any coronavirus outbreaks in processing plants.
EY’s report also forecasts that as many as 10,700 full-time equivalent jobs could be lost as a result of the downturn in the Irish dairy industry due to COVID-19.
Mitigate
In order to mitigate this damage, the EY report says that urgent measures are needed to support dairy markets in the short and medium term in order to protect farmers, dairy processors and the overall rural economy in Ireland.
The report states that private storage aid (PSA) should be introduced as a matter of urgency in order to “address the market imbalance”.
EY also suggests that the Irish Government and the European Commission could help limit the exposure of Irish dairy companies by underwriting extensions to existing export credit insurance, now allowed under EU competition law.
Exports
Irish dairy processors export 92% of all products they produce, meaning the sector has a significant exposure to global markets worst affected by COVID-19.
The EY report found that more than three-quarters (76%) of Irish dairy export volumes are shipped to countries in the top 15 most-affected COVID-19 countries.
The EY report also states that Irish dairy processors will need an additional €550m in Government-driven working capital in order to assist processors deal with increases in storage costs as a result of less product being exported. This would likely take the form of low-interest loans for large businesses.
The report highlights in stark terms the threat facing the Irish dairy processing industry
“The report highlights in stark terms the threat facing the Irish dairy processing industry, as well as farmers and the rural economy, without national and EU supports,” said DII director Conor Mulvihill.
“The Minister for Agriculture Michael Creed and his team have engaged in Trojan work in seeking to activate EU supports to the industry, but this report clearly shows that far more needs to be done to protect the industry at national and EU level,” he added.
Mulvihill added that the Irish dairy industry is an engine of the rural and national economy and it is vital that the necessary steps be taken quickly to enable the industry to be in a position to contribute to the national economic reboot when it occurs.
Read more
Dairy markets on the brink as COVID-19 devastates all before it
Coronavirus likely to cause ‘material disruption’ to milk processing – Co-ops
Irish co-ops prepare for intervention
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