Milk producers take a €120m hit from drought

THIS summer’s drought and feed shortages have halted seven years of growth in the dairy sector and cut projected processor throughput by around 400 million litres — which translates into an estimated €120m on milk producers’ returns.

Industry officials admitted that dairy expansion had stalled, as the industry struggled through the summer heatwave.

The total volume of milk processed by Irish dairies in 2018 is likely to hold at around 7.5 billion litres, including 800 million litres from Northern Ireland, even though operators had predicted growth of 4-5pc for the year.

The anticipated increase in milk production was expected to deliver an additional 300400 million litres.

However, the searing heat of June and July, and the consequent collapse in grass growth, totally disrupted expansion plans at farm level.

This was particularly the case across the south and southeast, where most of the recent lift in milk output has been concentrated.

Since the start of the decade the volume of milk processed by Irish dairies has increased by around 50pc, rising from over five billion litres to 7.5 billion litres. Dairy cow numbers have grown by around 40pc to 1.4 million head during the same period.

While processors envisage a return to growth in 2019, farmers’ confidence and bank balances have taken a serious hit over the last 12 months, and some might be more circumspect about increasing numbers.

Teagasc estimate that winter fodder supplies on highly-stocked dairy units in the south and south-east are 2530pc off requirements.

Profits on dairy farms are also forecast by Teagasc to halve this year.

Outlook

Meanwhile, the outlook for global dairy markets remains steady, according to Peter Paul Coppes, a senior dairy analyst with RaboBank.

Mr Coppes pointed out that supply growth had slowed across Europe and North America, and stock levels were down.

New Zealand has had a good start to its season, but Australian milk production has been slower, Mr Coppes pointed out.

He said that ongoing Brexit talks, and US trade tensions with China and Mexico, were a cause of some concern.

However, he said global markets remained generally steady.

Closer to home, butter prices on the Dutch exchange have fallen around €500/t over the last two weeks to €5,000/t, but demand for product remains strong.

However, the market remains weak for skim milk powder (SMP). The sale price of €1,500/t remains 10pc below intervention levels of €1,650/t.