Ireland’s dairy industry is in “a very new dynamic” in which the rapid expansion in milk supply which took place over the past decade has come to an end.

“This new dynamic has implications for farmers and milk processors, but it also has serious implications for global dairy buyers, as security of supply is no longer a certainty,” Tirlán’s newly installed CEO Seán Molloy has said.

“We have had a period of massive expansion, but that’s over now,” he told the Irish Farmers Journal, adding that the next phase for the industry will likely be one which will include consolidation and rationalisation at all levels.

“Since the removal of milk quotas, Tirlán has invested €600-€700m in processing capacity and asset replacement.Now it will be about adding value.” Molloy said.

Policy changes, such as the threat to Ireland’s nitrates derogation, have material implications for the dairy industry’s ability to produce and export dairy products, he said, adding that such changes must be resisted.

The imposition of such restrictions on the industry “will change our focus,” he said.

Molloy took over as Tirlán CEO on 1 August, having been a director of the co-op (formerly Glanbia Ireland) for 12 years.

He said there is a real need for discussion and moves on consumers’ willingness to pay for the standards of food production expected in Ireland.

“Consumers are willing to pay more for things like Netflix subscriptions and all forms entertainment, but they don’t appear to be willing to pay more for food,” he said.

Standards

“Irish farmers and processors are investing to comply with ever-increasing standards, and the family farm model requires the market to recognise those higher costs compared to cheaper, less sustainable alternatives.

“A failure to appropriately reward farmers for the efforts involved in producing high quality sustainable food threatens the very supply of this food.

“More than any time in the history of our economy, we run the risk of driving young people away from farming to alternative careers if we do not ensure a consistent and fair return is achieved for primary producers.”

Processors like Tirlán, which exports some €2.5bn of dairy product to over 100 countries, are impacted by Ireland’s high cost economy, Molloy warned. “There is no denying that sustainability issues including decarbonisation and climate adaptation are essential to a positive future economy and world.

“However, addressing these issues is placing a significant cost burden on both processors and farmers”.

Ahead of Budget 2025, he challenged the Government to ensure that the appropriate level of support was provided to the industry to achieve the required transition without significantly damaging competitiveness.

A high cost economy also has implications for attracting and retaining labour, the Tirlán CEO said, warning that the availability of skilled labour on farms is a growing problem and is impacting output.

The high cost of living, particularly as it relates to housing, has implications for both urban and rural Ireland – requiring ever-increasing wage rates to meet the growing burden of accommodation costs, he added.

“Everything has changed post-COVID-19,” Molloy said. “The pandemic drove a rapid increase in cost inflation, which has penetrated all parts of the economy and has implications for our competitiveness”.

Molloy said that, given the contribution of food production to the national economy, issues such as these need to be addressed so that the industry can attract and retain talent.

“Ireland has a wonderful reputation for producing high quality dairy products – we are selling into a growing international market where supply will be challenged to meet demand in the years ahead.

“Despite the current challenges, I would be very optimistic for the future outlook for our dairy industry,” Molloy concluded.

Seán Molloy will join Joe Manning, commercial director for Tesco Ireland and Northern Ireland, and Nick Curtis-Davis, director of global strategic insight at Bord Bia, on a panel at the ASA conference in the Lyrath Estate Hotel, Kilkenny on Thursday 5 September.