Is the Irish dairy sector to be used as a beacon of economic hope?
Written by Tara Mulvany
This week Irish dairy farmers can begin producing as much milk as they like. Up until now, the production of cow’s milk was restricted by what is known as the EU milk quota regime. This system was put in place in the 1970’s to control the over production of milk that had resulted in what anyone in their 40’s might recall as the infamous ‘milk lakes’ or ‘butter mountains’.
Initially, the regime worked by fixing a limit or ‘quota’ on each individual producer or purchaser of milk. If the limit was exceeded, a fine or ‘super levy’ was applied. Subsequent changes to the regime meant that producers only had to pay the levy when the Member State also exceeded its ‘national’ quota.
EU quotas did their job, in so far as they did away with the notorious over production of butter and milk, which had exceeded over 1 million tonnes at its peak in the 80’s. But they brought with them huge controversy, not least uncomfortable images of farmers literally pouring milk down the drain to avoid the penalties associated with them.
So why remove the quotas now? Quotas were never meant to last and were initially introduced for a 5 year period only. The main reason for ending them now is that there has been a considerable increase in consumption of dairy products on the world market in recent years. Now past their sell-by date, the quotas have been preventing EU producers from responding to this growth in demand.
So what does this mean for Irish producers? The end of the quota regime has been described by Simon Coveney, TD, Minister for Agriculture, Food & Marine as the most important policy change for rural Ireland in 30 years. It means that Irish milk producers are in a position to expand for the first time in three decades. The goal is to double Ireland’s milk production in the next 10 years and to compete on the world market against dairy producing giants like New Zealand.
This opportunity obviously hasn’t been lost on the likes of Glanbia who has been investing heavily in increasing processing capacity with its new state of the art plant on the Kilkenny-Waterford border. In terms of positive knock-on effect, the plant is expected to generate an estimated €400 million for the broader rural economy. Kerry, Dairygold, Lakelands, North Cork Co-op, Aurivo and Carbery have also been making substantial investments.
But despite the hyperbole from politicians, it’s still impossible to predict if the end of quotas will deliver the level of stimulus required to kick-start the rural economy again. Forever under threat from volatile prices, things are never likely to be plain sailing for Ireland’s dairy farmers. But with so many medium to long term opportunities on the horizon, one thing is certain, the Irish dairy sector will be used as a beacon of economic hope for some time to come.