Dairy farmers have been warned that the current increase in milk production is ‘unsustainable’ and they should heed market warnings.
Agriculture and Rural Development Commissioner Phil Hogan has warned that there is a real risk of oversupply in the European milk market as a result of high prices this year.
Commissioner Hogan was speaking following a meeting of European Agriculture Ministers this week and said while last year was an excellent one with a significant increase in milk these same higher prices have encouraged higher production.
But he warned supplies of milk has ‘unsustainably increased’ in some Member States and singled out Ireland, Poland and Netherlands.
The Commissioner also said he had noticed increased production in the largest Member States in recent times particularly France and Germany.
Hogan also warned dairy farmers that they have a “responsibility to look at the market signals and to heed them and to plan accordingly”.
“There is now a very clear risk of oversupply in the market in the EU in milk,” he said.
It comes at a time when Europe already have 350,000t of skimmed milk powder in storage – the EU’s method to remove excess milk supplies from the market and help keep a floor on milk prices.
Recent official figures from the European Commission show that Ireland’s milk production growth was amongst the highest in the EU at 9.4pc between January and November 2017 and comes on the back of a dramatic increase of milk production in Ireland since the removal of milk quotas in 2015.
Hogan’s warning comes as increasing numbers of farmers are choosing to switch to dairy farming, while existing producers continue to expand their herds.
ICMSA President Pat McCormack said oversupply is always a risk in dairy markets but it is ICMSA’s firm view that it is too early at this stage of the year to predicting an oversupply situation.
“While volumes have increased and oversupply is a potential risk, there are a number of positive factors in the marketplace currently including reduced production in New Zealand, two positive GDT auctions, increased oil prices which should stimulate demand and it is also important to point out that in volume terms, Germany and France showed the greatest increase in production in November 2017 (latest statistics from MMO) and not Ireland, Poland and the Netherlands.”
Dairy family farm incomes hit average record high of more than €90,000 last year, according to Teagasc figures and a significant part of the increase was helped by milk prices surging by 30pc to 36c/L. The average dairy farm income is now up by €40,000 over the last year.
The Teagasc economic outlook pointed out the stark differences in the farming enterprises, with margins in suckling cattle enterprises stagnant, while those finishing cattle for beef saw an 8pc rise.
Both pig and sheep farmers also enjoyed higher prices, while under-pressure cereal farmers saw a small pick-up in incomes and yields from crops were also up. The figures show that direct payments from Brussels account for 85pc of family farm income on cereal farms.
Dairygold chief executive Jim Woulfe recently warned that a 10-billion-litre dairy industry is in sight in the south of the country but said it won’t occur without challenges.
Mr Woulfe told the Positive Farmers Conference in Cork recently that it would face a number of problems, such as volatility and ensuring farmers adhere to the sustainability agenda.
“In the long term the demand for dairy and emerging markets will grow,” he said.
“We will have fluctuations and volatility but we have measures in place. I see a 10 billion south-of-Ireland dairy industry in sight if we follow the sustainability agenda. There will be downward pressure in prices in the short term but I’m optimistic for the long term.”
Source: Farm Ireland