Dr. Denis Murphy:

I thank the Chairman and members of the joint committee for giving us an opportunity to present the annual report of the National Milk Agency for 2013 and to discuss its contents. I will provide a brief general overview of the liquid milk sector in 2013, and the agency's chief executive, Dr. Muiris Ó Céidigh, will address in greater detail the contents of the annual report.

The first slide provides an overview of the Irish dairy sector in 2013. That was a record year despite adverse spring weather conditions and a fodder crisis. Domestic milk supplies amounted to 5.42 million litres, an increase of 4% on 2012.

It was a record year in terms of milk supply and composition. Some 92% of the domestic milk supply is used in manufacturing milk for dairy products, while 8% is consumed in the domestic liquid milk market. On the price side, the average producer price for manufacturing milk last year was the highest on record, representing an increase on the previous year of 7 cent per litre, or 22%.
The consumption of fresh milk in the domestic market is 563 million litres, an increase of 0.4% on 2012. It is the largest consumer market for milk and milk products in the State. The per capitaconsumption of 0.34 litres per day gives Ireland the second highest per capitaconsumption of liquid milk in the EU. Some 74% of the market is supplied from domestic supplies, while 26% is supplied from imported milk in package and bulk form, imported from Northern Ireland and processed in the State. Retailers distribute 79% of all fresh milk, catering distributes 11% and doorstep deliveries comprise about 10%. On the retail side, about 55% of retail milk is own-label milk.
The average retail price of fresh milk in 2013 was 94 cent per litre, an increase of 1 cent per litre on 2012. The average producer price for fresh liquid milk was 39 cent per litre, an increase of 5 cent per litre on 2012. It can be noted that even though the retail price decreased, the producer price increased. That is because the producer price for liquid milk is now mainly linked to monthly manufacturing prices for export, plus a winter premium. The differential, however, between the average producer price for liquid milk and the producer price for manufacturing milk was less than 1 cent per litre, compared to a differential average over the past 19 years of 4 cent per litre.
The structure of the domestic fresh milk market in 2013 is highly concentrated at retailer, processor and producer level. The five largest retail groups have a market share of 93%, and the three largest have a market share of 79%. Retailers have about a 70% share of the milk market. The five largest processors produce 91% of registered milk supplies, and of the 581 largest producers, 30% of the total number of registered producers supply 60% of registered milk supplies.
I refer to registered contracts and registered supplies in 2012 and 2013. There were 1,883 registered producers with contracts in the State, representing 10% of all milk producers. They supply 16% of domestic milk supplies. The total milk supply from this source was 830 million litres for the year, of which 50% was for the liquid market and 45% was for manufacture. From an agency point of view, the critical thing is the cover for domestic liquid milk consumption in the winter period; cover in the five prescribed months in 2012 and 2013 was 132%, while in the critical months of December and January, cover was 127%.
The next chart shows the milk supplies of registered producers and the contracts of active registered producers for the past 11 years. It shows great stability in the liquid milk supply sector. The average is around 827 million litres. Liquid milk was about 449 million litres, or 55%, on average over that period, and manufacturing milk was 365 million litres, or 45%, on average. The next slide shows that information in a graph. It covers 2002-03 onwards and refers to the period from October to February. We can see the cover for domestic liquid milk consumption.
There are references to the last item in the annual report. We are within a few months of the abolition of EU milk quotas, which have been in vogue in Ireland since 1983. It is an opportunity as well as a challenge, and is a completely transformational event for the Irish dairy industry. The projected increase in domestic milk supplies by 2020 is 50%, all of which will be destined for export markets. This will result in a sharp increase in volatility in milk prices for producers and will change the structure, scale and systems of milk production, processing and marketing in the State.
Dr. Ó Céidigh will deal with the annual report.