Industry call for dairy market supports

Measures to support the dairy market are needed to protect farming, dairy processing and the overall rural economy, a new report has revealed.

The report, ‘The Potential Impact of COVID-19 on the Irish Dairy Industry’ was commissioned by Dairy Industry Ireland (DII) and conducted by business advisory firm EY. DII, which is an IBEC trade association, represents Irish primary and secondary dairy processors, including Glanbia Ireland.

Of the key findings the detailed report finds that, as a matter of urgency, measures to support the dairy market in the short and medium term are needed to protect farming, dairy processing and the overall rural economy. Currently the sector supports almost 60,000 people in direct and indirect employment across Ireland.

The report, which found that the dairy sector is worth €11.3bn annually to the Irish economy, states that in order to offset these financial losses and supply chain issues, supports through Aids to Private Storage are urgently needed to “address the market imbalance”.

The report also recommended that the Government / EU could help limit the exposures of the companies by underwriting extensions to existing export credit insurance, now allowed under EU competition law.

The spread of COVID-19 has had a dramatic impact on international dairy markets. In particular, the foodservice sector has been adversely affected with restaurants, airlines and hotels shut across Europe. Milk destined for foodservice customers is now going in to other production areas such as powders and butter. This has created a significant oversupply. Supply chains have also been disrupted with a shortage of shipping and logistical routes to markets.

“The report highlights in stark terms the threat facing the Irish dairy processing industry as well as farmers and the rural economy without national and EU supports,” said DII Director Conor Mulvihill.

“Irish dairy is an engine of the rural and the national economy and it is vital that the necessary steps be taken quickly to enable the industry to be in a position to contribute to the national economic reboot when it occurs.”

Irish dairy processors export 92% of all products produced with the EY report finding that Irish dairy has a significant exposure to global markets worst affected of COVID-19. The report found that 76% of Irish dairy export volumes are exported to countries in the top 15 most effected COVID-19 countries.

Findings of the Report:

• The dairy sector is one of the largest indigenous contributors to the Irish economy, accounting for €11.3 billion in 2020
• Near term output from the industry could fall by as much as €2.3 billion in value as a result of falling demand and potential losses in processing capacity due to COVID-19.
• Additional working capital of up to €550 million could be required by the industry to cater for increased stockholding and other requirements.
• Priority testing is required to allow key technical employees to return to work as quickly as possible.
• Irish milk processors have been proactive in their approach to putting in place measures to best minimise COVID-19 impacts. Key measures include: COVID-19 response teams established by all processors; specific actions to protect employee health; investment in remote working technology; and enhanced industry co-operation.
• The overall economic impact of a 20% drop in demand for dairy products would be €2.3 billion output reduction and a loss of more than 10,700 full time jobs.

First Published 21 April 2020