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Ireland’s plan: Maximizing the post-quota EU production surge

Kevin Dardis Published on 11 March 2014

The removal of long-term constraints on the Irish dairy industry and the inherent potential in the existing Irish dairy herd will result in a considerable increase in production over the coming years.

A successful strategy to prepare for this massive increase is critical to the future of the Irish dairy industry. There is likely to be some spectacular front-loading in terms of increased production in the early post-2015 years.

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The power of marketing
Each of these pieces of the post-quota jigsaw are important, with marketing arguably the most influential in determining success.

In recognition of this, the Irish Dairy Board (IDB) is already expanding its marketing strategy into key areas where there is growing demand for dairy products and has begun securing long-term customers for anticipated production levels.

The IDB is also in a good position to research and develop new marketing strategies in a number of mature markets that can be used as testing grounds for new initiatives. One such market is the German butter market, where the Kerrygold brand, which encompasses a range of butter and cheeses, has maintained a strong hold in the premium sector for many years.

There are still opportunities to grow market share here, but it is also crucial to protect existing market share through constant innovation and promotion. In tandem with the actions of the IDB, long-term contracts are already being sought and secured by individual processors.

Glanbia, the international dairy food company primarily based in Ireland, is tieing long-term production contracts into the development of its new processing facility in Belview, County Kilkenny.

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The aim is to build facilities to produce a range of dairy products and ingredients for which there is a secure market and for which customers have already been identified and contracted for product, post-2015.

This tandem strategy is fundamental to ensuring that the anticipated expansion in Irish milk production after 2015 is successful. That success is predicated on there being a viable, long-term market for the dairy products manufactured from that milk.

Production strategy in place
Marketing must be backed up with an appropriate production and processing strategy. Transport logistics must be developed in conjunction with product promotion; storage and further processing and packing facilities are also priorities.

Matching product development to market requirements is essential, and that requires heavy investment in product R&D. The processing and sales investment program for Saudi Arabia, announced by the IDB, is a perfect example of where an integrated approach to market development is crucial.

At farm level, planning for extra production is already at an advanced stage on many farms. Heifer calves born last spring will calve down in the months preceding the elimination of quotas in April 2015.

The advances in dairy genetics over the past decade mean that these cows will be superior to previous generations. They have been bred for longevity and high milk solids.

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The fact that there has been an emphasis on milk solids, especially protein content, means that the milk produced should be of higher value since protein now drives the ultimate added value of many dairy products.

Collaborative approach
The integrated strategy for the Irish dairy industry, post-quotas, involves all sectors working together. Maximizing processing efficiency requires extending the milk production season.

Too high a production peak in the traditional spring-calving Irish dairy herd leads to inefficiencies in the processing sector. A flatter production curve, extending lactation into the early and late “shoulder” months, helps maximize processing capacity and efficiency.

Targets have already been put in place to ensure that this happens. Production percentages have been allocated to producers with milk price penalties accruing for overproduction in the May-June period and bonus payments allocated for the off-peak months.

The fact that most producers are adhering to these percentages means the strategy is already working.

With an anticipated 50 percent volume expansion expected in the five years after 2015, it is critical these measures work, ensuring optimum processing efficiency within the constraints of the unique Irish milk production model and consequently ensuring that Irish producers get maximum value from the milk they supply.

Quality – the key ingredient
Incremental improvements in milk quality over the past 10 years mean that the processors have greater flexibility in the end use of that milk. While Ireland only produces 1 percent of the world’s milk, it supplies 15 percent of the milk powder used in the manufacturing of the world’s infant formula.

Virtually all of the infant formula manufacturers have a presence here or have long-term supply lines from Ireland for key dairy ingredients for their products. This is a growth market that Ireland will continue to concentrate on in the years ahead.

Burgeoning populations, rising living and dietary standards in Asia, as well as in Africa, mean that the demand for infant formula is continuously expanding. Rigorous quality standards in place, right along the supply chain, mean that Ireland’s dairy processors can capitalize on this growth.

They already have a track record of supplying high-quality product and will have an expanded supply of high-quality milk with plans in place to develop the processing facilities to manufacture the ingredients that customers require.

Research delivery
While the Irish dairy production model is built on the concept of the family farm, inevitably that model will develop over time. The most significant change will be toward larger-scale units, mostly from existing producers increasing output to maximize the efficiency of their farms by allowing them to concentrate exclusively on milk production.

Moorepark, one of the world’s leading dairy research centers, specializes in pasture-based systems of milk production and is at the epicenter of developing methodologies to allow producers to optimize their milk production operations.

Moorepark is the brainchild of Teagasc, Ireland’s agricultural and food development authority, whose focus has been to ensure that milk expansion post-2015 is profitable and sustainable at farm level.

As a result, a number of key strategies have been put in place, including the development of commercial production units around the country, using the latest management techniques, to show how larger-scale production can deliver higher profits on farms.

Greenfield Farm in Kilkenny is a prime example. Though larger than most Irish producers can reasonably aim for, the Greenfield farm shows how larger herds can be managed profitably and efficiently. A major benefit of this approach is that mistakes are being made now and unforeseen problems are arising and being dealt with.

Lessons from these units are valuable to all producers to enable them to avoid those problems on their own farms.

This cooperation between the Irish dairy industry and government bodies bodes well for a future where some of the biggest challenges in developing a successful on-farm strategy will be coping with very high and expensive environmental, animal welfare and milk production standards in a manner that will still deliver a profitable and sustainable milk production system. PD

kevin dardis

Kevin Dardis
Senior Brand Manager
Alltech Ireland

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