Sep 252010

The President of ICMSA, Jackie Cahill, has repeated his organisation's warning that unless any mooted plans for expanded milk production are based on cold hard facts and involve better income for the dairy farmers then they must be viewed sceptically. Mr Cahill stated that our ability at farm level to produce extra milk is not in question, the much more important question – and he didn't mind asking it – was what markets were going to take the extra product and how much of that export revenue would find its way back to the milk suppliers who were the foundation stones of the whole dairy sector edifice. ICMSA has commissioned a report from Professor Michael Keane to estimate the likely cost of expansion. His preliminary findings indicate that a 20 per cent expansion between now and the year 2020 would require a capital outlay of €150 million.

Mr Cahill said he shouldn't have to point out that that 20 per cent expansion is very modest compared to the 50 per cent increase in milk output that was set as a target in the recent Food Harvest Report. But even this figure of €150 million for a 20 per cent expansion will require serious thought and planning given the likely increased cost of funding in the future. Professor Keane has also provided estimates of the annualised cost of this investment which worked out at €14.3 million. On a per litre basis, the capital investment would be 16 cent per additional litre produced or an annual recurring cost of 1.6 litre for extra production.

The ICMSA President said that question of who will actually fund this investment is an issue on which the dairy industry as a whole must now address and agree. While farmers should be encouraged to expand, and facilitated if that is their intention, it is unreasonable for the cost of this expansion to be loaded on all dairy farmers. As an example of where we should be looking for a comparison, he highlighted the arrangement, which exists in New Zealand where the contribution system to capital investment required to process milk is very well developed.

On a related issue, the preliminary findings of Professor Keane shows that in increase of 20 per cent in milk output – without increasing the current peak delivery – would require all the expansion to come from a liquid milk type of production (all-year round production). This would clearly be uneconomical where the reduction in processing costs of 0.5 cent per litre would be offset by significantly higher farm production costs that would wipe out the benefit at processing level.  Based on this preliminary figure, it must be concluded that, for bulk storable commodity products, the clear advantage in an Irish context lies with spring calving grass-based production.

Mr Cahill said that while some people may see the 20 per cent as being very modest and that a much higher level of expansion should be envisaged up to and including the 50 per cent set by the recent Food Harvest Report. ICMSA noted that that level of expansion would require a significant change in the dairy product mix produced in Ireland and in an uncertain market, and the acceptance that volatility would be a feature of this expanded market, it was very difficult to put forward a business plan at this stage.

ICMSA had commissioned the Keane Report in order to provide hard numbers on the cost and intended following it up with some serious cost-benefit analysis. Because as the disaster of 2009 showed very graphically, the stakes are too high to get this kind of project wrong The question is not how much more milk we can produce; the question should be: where are the new markets which we can supply at a price that will give dairy farmers the kind of income their efforts and expertise deserve? Mr Cahill said that had to be the starting point for any discussion about expanded milk production.


Ends          2 5 September 2010.


Jackie Cahill, 087-2820663

President, ICMSA.