Less stainless steel and more added value is the way forward for our dairy industry

Profitability and resilience must be the guiding principles of dairy policy development, writes Tom Phelan

After an exceptionally good year in 2017, Irish dairy farmers have come through a difficult few months. The serious downturn in milk prices has been compounded by weather factors; for many, spring only started on the first of May. The fodder crisis, labour shortages, stress, lower volumes and constituents have cost farmers dearly.

This difficult period has focused minds on the importance, in a volatile market and in the face of climatic challenges, of farm-level profitability and resilience as the critical guiding principles of future dairy development in Ireland.

Irish dairy farmers are uniquely placed to supply a growing global market for sustainably produced, grass-fed, high-quality dairy products.

Not only are we top of the EU class on carbon efficiency, we are the only ones measuring and able to prove it through the SDAS farm audits.

This unique advantage, achieved through our hard work as farmers, must be leveraged by our industry for our benefit.

Market management tools

Farmers will continue to need EU support through the new CAP to cope with the income consequences of volatile markets.

In the post quota era, intervention as we know it has shown its limitations — thought it did play a crucial part in 2016/17 in rebalancing markets.

For the future, farmers will not only need strong direct payments, but also market and risk management tools that are more responsive to market trends and avoid the damaging build-up of stocks.

Some of those tools will be delivered under CAP, while more specific income risk management may be provided through fixed-price contracts, financial packages with variable repayments, tax measures, and other forms of hedging yet to be devised.

All those must be voluntary and provide farmers with a suite of options to better manage the cash-flow impact of extremely variable incomes.

On global dairy markets, Irish dairy competes with New Zealand and the US, and what happens in Europe is only part of what determines our prices.

IFA has never believed in unilateral moves to regulate EU supplies when production trends in non-EU regions are equally likely to drive our prices.

Not only would a reduction scheme unfairly restrict Irish farmers’ long pentup potential and natural advantage, but it would also play into the hand of far less carbon efficient global competitors, to the detriment of the environment and consumers.

Profitability

From an Irish industry perspective, we cannot continue to see future developments as purely supply-driven, with expansion expected to be its own reward for farmers. Maybe it is time to have less investment in stainless steel, and more in added value product development, marketing and in farmers.

Farmers need strong market signals from co-ops and Ornua, which go beyond conditioning them for lower milk prices. Industry must go after the markets that can deliver viable and profitable returns, and fully leverage our unique advantages of grass fed, sustainable, high animal welfare production.

This must be clearly communicated to farmers in terms of what volume of milk may be required to supply those markets, optimising returns for Irish farmers, and delivering profitable milk prices.

Resilience

The hectic 2018 calving season has shown the urgent need for extra on-farm labour — and in this respect it is good to see that hard lobbying by IFA in the last year has yielded results in the introduction of a pi- lot labour permit scheme for workers from outside the EEA.

Together with the People in Dairy Stakeholder Group recommendations for enhanced career paths in dairy farming, which IFA also contributed to, these permits must be fully utilised to ensure that dairy farms are adequately staffed, especially during calving.

Beyond labour, though, the advice to dairy farmers by Teagasc, co-ops and others must be recalibrated, especially in terms of feeding, finance and human well-being.

It is clear that climate change is influencing the length and severity of our winters. Farmers must be advised to provide higher silage reserves to cater for this.

This may require some greater flexibility in the general Teagasc feeding advice, too, without losing our grass-fed advantage.

Farmers must be helped to become better financial and cash-flow managers. They will need to build up cash reserves in good years to be used when times are harder.

As we prepare our pre-Budget 2019 submission, IFA is continuing to work hard to persuade our Government to find tax-efficient ways of encouraging this.

Last but by no means least, resilience is also about the human welfare element. Even if dairy farming offers good income prospects, its demands on labour, finance and a wide array of skills can be personally very challenging.

Farmers must be mindful of their own physical and mental well-being, as well as safety on their farms, and other stakeholders must support them in this.