Dairy Talk: Ireland Doubles Down

May 29, 2014 08:28 PM
Dairy Talk: Ireland Doubles Down
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The U.S. now exports roughly 15% of its milk production. And already, some folks are getting nervous that such large export volumes make U.S. dairy farmers beholding—and vulnerable—to global markets.

Consider then Irish dairy farmers. (See "Irish Eyes Are Smiling," pages 20 to 22.) They currently export nearly 85% of their production. And with the elimination of European Union dairy quotas next year, the plan is to increase those exports by 5.5 billion pounds. That would push total Irish exports to close to 90% of production. Talk about vulnerable.

One could call this foolhardy—or, simply responding to opportunity. In reality, the Irish have little choice. They have few natural resources other than grass. And, boy, do they have grass. Acres and acres of it.

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And yet, only 20% of their pastures are currently grazed by dairy cattle. By devoting a larger percent of their pastures to dairy cows and planting and feeding more grain, they have a good shot at increasing milk production.

Dairygold Cooperative, Ireland’s second-largest milk processor, is also offering an incentive for early calving to increase late-winter and early-spring milk production and even out milk flow over the year. That’s a big deal in Ireland. Grass-fueled, peak milk flow in May can be seven to nine times that of the November through January production flow.

Such uneven milk flow shoots processing capacity needs and capital costs through the roof. By calving just 10 days earlier, coupled with more grain feeding, Dairygold expects it would get more milk production in both spring and fall. That could boost overall milk production while evening out processing needs. 

With world milk prices above $20 per cwt. and net margins exceeding $6, dairy cattle offer unquestionably the best return on agricultural investment in Ireland Last year, dairy farm income doubled to more than $90,000. That compares to $35,000 for grain farms, $20,000 for sheep farmers and barely $15,000 for beef producers.

The average Irish industrial wage is about $45,000. So under current economics, dairy farm returns are extremely attractive to dairy farmers and create career opportunities for their children. That’s in sharp contrast to the early 2000s, when dairy kids left rural areas in droves to help fuel Ireland’s economic boom times, known as the Celtic Tiger.

There is risk, of course. Lots of it. World markets could collapse. The expected growth might not come.

So to reassure farmers, Irish processors such as Glanbia, for example, offer three-year contracts that guarantee margins. Dairygold is offering production contracts with the potential for premiums.

There could be lessons here for the U.S. dairy industry. All projections point to a growing global dairy market—perhaps 55 billion pounds more milk will be needed by 2020.

The Irish are attempting to grab a small portion of that potential. But they’re doing it in a planned, reasoned, risk-intelligent way.

Perhaps the U.S. should follow their lead.

jim dickrell, editor

Jim Dickrell, Editor

JIM DICKRELL is the editor of Dairy Today. You can contact him at dairytoday@farmjournal.com.

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