Written answers

Tuesday, 9 December 2014

Department of Agriculture, Food and the Marine

Milk Prices

Photo of Tom FlemingTom Fleming (Kerry South, Independent)
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228. To ask the Minister for Agriculture, Food and the Marine his views on the Teagasc statement regarding a dramatic reduction in milk prices in 2015 which, if allowed to happen, will decimate the income of dairy farmers and threaten their viability; his strategy to counteract this scenario; and if he will make a statement on the matter. [47103/14]

Photo of Simon CoveneySimon Coveney (Cork South Central, Fine Gael)
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I assume the Deputy is referring to the publication of the Teagasc Annual Review and Outlook for 2015.  Dairy Prices are a function of global  market dynamics, with supply and demand issues in markets across the globe affecting prices  across different dairy commodity groups in domestic markets. Price volatility is a continuing feature of dairy commodity markets, and it is clear that managing the price peaks and troughs in a way that allows farmers and others to plan ahead is a significant challenge for the sector.

 After two years of extremely high prices, the combination of strong production in key dairy producing countries, including the USA, New Zealand, Australia and the European Union, driven by good weather, increased cow numbers in the US and strong cereal harvests, has seen the emergence of a surplus in dairy products on international markets coming into 2015. Furthermore, with Russia and China accounting for 27% of the traded world market in the dairy sector, the effect of surplus stocks in the Chinese market along with the displacement effect of the Russian ban can be seen as critical factors in setting the context for price evolution in the sector.

The anticipated decline in 2015  largely reflects the impact of the aforementioned developments on global dairy markets. Teagasc expects that average Irish milk prices in 2015 will fall to 27 cent per litre, a reduction of over 10 cent per litre on the average for 2014. However it should be noted that this follows several years of very good incomes on dairy farms. Furthermore, Teagasc are clear that these negative effects are expected to be temporary in nature.

Under the new Common Agriculture Policy there is a range of tools available to mitigate the worst impact of downward price volatility, including Aids to Private Storage, Intervention and Export Refunds and I have called on the EU Commission to deploy these tools as appropriate. The Single Farm Payment will also provide a measure of income stability during this difficult period. I have also asked the banking sector to tailor their financial products  to allow for the kind of price volatility that will be a feature of international dairy markets, and  of course  co-ops have a role to play in ensuring that their contractual arrangements with suppliers provide a measure of stability.  A focus on innovation and the production of added value products will also have a role to play in mitigating the impact of volatility, and a greater use of futures markets may also feature among the tools deployed by the sector.

In terms of how this will evolve in the medium term, Teagasc, in common with a number of other commentators, anticipate that lower milk prices will lead to a slowdown in the expansion of milk production globally through 2015, with global dairy markets set to witness signs of recovery as the year progresses. In the medium to longer term population growth and increasing affluence in developing countries will continue to drive strong growth in demand for dairy products, and Irish producers will be well placed to take full advantage of this demand.


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