While latest indications are that the global milk crisis may have finally bottomed out, the recovery in price paid to farmers may take longer to emerge, Mairead McGuinness MEP and Vice-President of the European Parliament said today (Wednesday) as she presented the 2015 Diageo Baileys Irish Champion Dairy Cow awards in Virginia, Co. Cavan. (Winner to be announced later Wednesday afternoon).
The MEP said global supply is ahead of demand arising from a series of issues, including the Russian ban on EU food imports and weakening demand from China. “In such a market buyers hold back expecting prices to fall further,” she said. “However, indications from New Zealand yesterday of a slight lift in its auction price, although still at very low levels, is reminiscent of the prices paid at the lowest point in the dairy market in 2009,” she said.
“This is the first increase in the Global Dairy Trade auction since March and while not a signal that the crisis has passed, it is a welcome development, but it will not turn losses for dairy farmers in New Zealand into profit,” she said. “Nor will it mean a rapid improvement in milk prices paid to producers here.
“What it does signal is that the market believes that New Zealand milk production will fall in the coming months in response to very low prices and that the supply demand balance is heading in the right direction.
“The outlook for dairy in the medium to long term is still positive. Irish dairy farmers are very competitive – our grass based production system gives us a competitive edge. The level of borrowing on dairy farms here is also well below that on farms in some EU member states and in New Zealand, where both debt levels and costs of producing milk has increased significantly,” Ms. McGuinness said.
“The conventional wisdom in the industry is that the current market difficulties will remain a reality for the coming nine months. Individual farmers will make their own production decisions based on farm output and costs, but clearly farming families will come under pressure in this difficult situation.
“The EU needs to grasp the challenge of this market downturn to put in place effective market support systems that are robust enough to deal with market volatility, which will continue to be a feature of globalised markets, long after this current crisis has passed. The debate about increasing intervention price should focus on the future, adjustments need to be made to the intervention price in order to deal with market disturbances beyond this crisis. We cannot stand over a situation where the buying-in price remains at 21c/l when production costs have risen significantly. Processors selling into intervention today are doing so at a loss,” she said.
Ms McGuinness praised the unique structure in the dairy sector with strong links between producers and processors based on the co-operative model. “This model is one which is the envy of other member states, including our nearest neighbours where there are much weaker links to the detriment of producers. In recent months, Irish co-ops have demonstrated that commitment to producers by holding prices above the market trend, cushioning producers from more dramatic falls in milk price,” she said. “While we are seeing milk prices move towards levels which reflect the reality of the market place, the commitment by the industry to its farmer supply base is real and is very important for the future of the sector.”
Commenting on the situation across the EU, she said it is regrettable that the current commodity price difficulties are pitting farmer against farmer. “This is a serious and regrettable development and one which needs a European response, and it must come from the EU Commission. I have demanded that the Agriculture Committee of the European Parliament debate these market issues at the earliest opportunity,” she said.
On markets, the MEP said there is very strong demand for dairy product in the USA and the ongoing Trade and Investment Partnership (TTIP) negotiations are hugely important for the dairy sector is gaining duty free access to this buoyant market with an appetite for our produce.
“Today, Irish dairy exports into the USA face import duties of tens of millions of dollars. A successful TTIP would see these duties evaporate with real benefits for the Irish dairy sector,” she added.
Ms. McGuinness congratulated the winner of the 2015 “The Baileys” champion cow.
The competition, in its 32nd year, is a showcase for the best in dairy cows. The entry criteria mean that only the best of the best get through to compete and only the cream – the winner – rises to the top. Virginia Show now in its 74th year hosts the Baileys Competition. The show attracts visitors from far and near and is a credit to the many volunteers who make it happen. “I am pleased that EU funding through the LEADER programme allowed the show to build a state-of-the-art exhibition centre and office space, enabling it to grow and prosper for the future,” she said.