Irish Milk Market Outlook

The prospects for Irish dairy exports are good for 2012, but prices will probably not be as high as in 2011. Exports increased by up to 17 per cent and output increased by three per cent. EU prices were generally higher in 2011, and the Fonterra price for whole milk powder increased by seven per cent following a rise of 40 per cent in 2010, according to an outlook by the Irish Ministry of Agriculture.
calendar icon 5 September 2012
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General Market Situation 2011

In 2011 international dairy markets continued to perform strongly and EU dairy commodity prices were high and relatively stable during the year. EU milk deliveries were ahead of 2010 levels and ended the year approximately 2.1% up, while producer milk prices increased across the EU reflecting the strong market. World milk production is estimated to have increased by 2.7% in 2011, with the EU accounting for around 20% of the total.

Output in Ireland

In 2011 there was a significant (18.6%) increase in the value of the milk sector to €1,820 million. This followed an increase of about 40% in 2010. Deliveries were estimated to be up on 2010 by 4.5%.


The average milk price paid to producers in 2011 was 35 cent/litre, a 13% increase on the 2010 price of 31 cent. In addition, dairy farmers continued to receive the dairy premium of 3.6 cent/litre. In the EU the average milk price was around 34 cent/litre, up from 30 cent in 2010.


Exports of Irish dairy products and ingredients were valued at some €2.66 billion in 2011. This represented an increase of 17% from 2010 as international dairy markets saw strong performance. Dairy exports were helped by improved global demand, stronger prices and increased production in Ireland.

Intervention/Market Management

Due to the strong market situation in 2011 there was no EU buying in of Intervention butter or SMP under the annual schemes, and the Commission disposed of the last remaining stocks by sale on the market and through the most deprived persons scheme. The 2011 Private Storage Aid scheme for butter operated as usual from March to August, and 105,000 tonnes of EU butter was stored under the scheme (18,000t in Ireland). Export refunds for dairy products were not required and remained at zero throughout the year.

Outlook 2012

EU and world dairy markets have fallen back from the levels reached in 2011, and the short term outlook in 2012 is quite volatile. While demand has remained strong over the past year there has been a large increase in supply in the major producing and exporting regions and global milk production increased by 4% in the first quarter. In the medium term most analysts forecast strong demand and higher prices for dairy products, with increased demand fuelled by population growth and rising prosperity in developing countries.

Quota Management

Ireland exceeded its national milk quota allocation in the 2011/2012 milk quota year, for the first time since the 2007/2008 milk quota year, by 1.05%, thereby incurring an estimated €16.5m fine. Factors which contributed to the over production were an 8% increase in production in March 2012 over March 2011 caused by increased calving, excellent weather conditions and a plentiful supply of grass; and a 1.35% increase in weighted butter fat content over the previous year caused by improving genetics and an increase in the use of ‘once a day’ milking.

Notwithstanding the annual 1% increase which is allocated on 1st April 2012 as part of the ‘soft landing’ and a softening in the global markets, the three remaining quota years are going to be equally challenging for farmers to remain within quota. Consequently farmers are reminded to plan their production activities carefully and pay close attention to the limitations imposed by the quota regime.

New Entrants to Dairying

The third of five annual increases of 1% in national milk quota agreed under the Health Check became available on 1 April 2011. As in the previous years, three-quarters of the increase was allocated as a top-up to the quotas of all active producers, while the remaining 0.25% was distributed to successful applicants under the Department’s New Entrants to Dairying Scheme. The first three years of the Scheme has identified 229 new entrants for allocations of a total of more than 42 million litres of milk quota. In 2009 successful applicants were exclusively comprised of ‘brand new’ entrants to dairying, while in 2010 and 2011 further cohorts, made up of those who had previously purchased quota as new entrants or ‘successors’ through the Milk Quota Trading Scheme were included. All successful applicants under the New Entrants Scheme undertake a 4-phase training programme facilitated by Teagasc. The closing date for the 2012 Scheme was 4 May 2012 and it is anticipated that the successful applicants will be announced in August.

In December 2009 a new three-year Dairy Efficiency Programme was introduced, under which €18 million of unused SPS funds would be spent in encouraging significant efficiency gains on Irish dairy farms mainly though participation in Discussion Groups. These groups, which are formed and assisted by facilitators who have been trained by Teagasc to a FETAC-accredited standard, place particular emphasis on the adoption of best practice in grassland management, breeding and financial management. Participants in the programme have their progress monitored by their facilitator, and they are required to meet certain standards on attendance and project completion. In return the participants receive a payment at the end of each year, with the level of payment determined by the participation rate in the Programme.

In 2011 more than 6,000 participants were involved in the programme and the vast majority have now received their payment. It is anticipated that most of the 2011 applicants will continue with the Programme in its final year in 2012.

Milk Quota Trading Scheme

The Milk Quota Trading Scheme continued to be implemented successfully in the 2011/2012 milk quota year. The improved market conditions and increased confidence of 2010 continued into 2011 and this was reflected by the increased demand for quota and the reduced volumes being made available for sale. The total volume traded in 2011 was just over 53 million litres, down from the 70million litres traded in 2010. Prices rose significantly, however, from 25 cent or less per litre at the end of 2010 to 50 cent per litre at the end of 2011, having reached a high of 56 cent per litre in the first of the two stages of the Scheme.

The Scheme continues to contribute to producer consolidation, with the number of active milk producers falling from 18,295 in 2010 to 18,263 in 2011.

September 2012

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