Global oversupply of milk, tightening demand and the ongoing Russia-EU trade ban have triggered further restructuring and consolidation within the sector which directly employs 2,300 people in the province.
Admittedly, Northern Ireland has had less cause to celebrate after the ending of milk quotas and their constraining effects were never felt as much here as in other member states. In fact, Ulster dairy farmers were able to utilise underproduction in the rest of the UK to nearly double their output since 1995. As a result, the province’s dairy industry, which now exports more than 80% of the 2bn litres of milk it produces annually, has been export-oriented for two decades.
Milk quotas were introduced in 1984 to control milk production and stabilise both milk prices and milk producers’ incomes.
Dr Mike Johnston, chief executive of Northern Ireland’s Dairy Council, said: «Removing a production constraint hasn’t been an issue. Where the bigger issue will come from is the effect of removal of quotas within Europe as a whole.»
Indeed, it is the EU-wide removal of milk quotas, coupled with four adverse global factors, that has contributed to the ‘perfect storm’.
Firstly, China, which has been the main international driver of EU milk exports in recent years, has seen demand slow due to having a massive stockpile of milk powder. Secondly, New Zealand, one of the world’s largest milk producers and a major trading partner with China, has increased its milk production by about 9% leading to further pressure on global milk prices. Thirdly, the Russia-EU trade ban has dealt a hammer blow to dairy exporters, as nearly a quarter of all EU dairy products -worth £1.8bn – are exported to Russia each year. Finally, supermarket price wars are putting even more pressure on already falling milk prices.
Dr Mike Johnston admits the omens aren’t favourable but predicts the ‘perfect storm’ will blow over when Europe’s post-quota market settles down over the next few months.
«Global demand for dairy products has been growing at around 2%. «The problem that we have is that, globally, milk production has been increasing at a rate that is greater than that, probably at a rate of 3-5%. «There is an imbalance there. But from a short-term point of view it’s too early to call. It’s going to take another month or so before we see the true picture of what’s happening to milk production in Europe.»
Source: Belfast Telegraph