The Emergence of the Irish Dairy Industry: a Success Story or a False Hope?

Ireland has long-known been a hotspot for certain key industries, such as pharmaceuticals, chemicals, and computer hardware & software. But as we inch closer to closing the second decade of the 21st century, a new industry is beginning a rapid expansion that will place it among the top industries in the Republic: the dairy industry. The statistics released over the past few years support this: €3.06 billion in exports in 2014, the industry’s 55% increase over the past five years, and the expected increase of 50% in dairy production over the next five years. This sector has the characteristics to become a dominant Irish industry, and combined with other factors such as increased domestic investment and increasing demand, this industry looks to have a large-scale international impact as well. The following piece will talk about the current state of the dairy market in Ireland and globally, and future prospects for the market as well. (See the graphic below for more information on this industry too!)

dairy pic

State of the Dairy Industry

Ireland has become a booming location for dairy production and exportation over the past five years, and counting. The dairy industry has grown from the basic assortment of cheeses and milk to expansive specialized nutrition product lines that include infant formulas, weight-loss food products, and sports foods. 2014 was an incredibly positive sign for the Irish dairy industry, where exports increased by 30% to Asia, 19% to the Middle East, and 18% to North America. More specifically, China is of very large importance to the Irish dairy market. Being the largest dairy importer in the world, combined with a declining self-sufficiency, China is critical to the growth and sustained success of the dairy industry in Ireland. After a melamine catastrophe in China forced consumers to turn to foreign dairy producers, the infant formula market has skyrocketed, with Chinese imports in infant milk formula rising from 7,800 tons in 2013 to 18,500 tons in 2014.

Domestically, Ireland is the third highest per capita consumer of milk in the world, with their consumption per annum reaching 130 liters per person. In the 18,500 dairy farms stretched out across Ireland, 5.5 billion liters of milk are produced each year. Ireland produces enough milk and dairy products to feed 52 million people per year! Most of the production from Irish dairy farms, however, does not go to individual consumers, but to domestic, regional, and international wholesalers.  However, it is also important to recognize the growing importance of the organic market in the dairy industry. In 2008, 14 Irish organic milk producers formed to create the Irish Organic Milk Producers (IOMP). Together, this coalition produces the 3.8 million liters of the 6 million liters of organic milk products produced in Ireland today. While not the only organic farmers in Ireland, they represent a very important movement to encourage more farms and producer groups there is a future for development and partnerships in the organic market, and also represent the growing movement towards this sector from normal dairy products.

 

Challenges & Concerns

While the dairy market has grown considerably, it is certainly not without its fair share of skeptics and critics. In an article by Catherine Cleary of the Irish Times (follow this link to read the article in its entirety: http://www.irishtimes.com/life-and-style/food-and-drink/milking-it-what-s-in-store-for-the-irish-dairy-industry-when-quotas-end-1.2125762), the author points out some of the possible flaws of this growing industry. Some of the following points have to do with the elimination of milk quotas around the world, which will allow limitless production and exports for this industry. For one, the pressure the government is putting on Irish dairy farms may be unreasonable. The government would like to increase Irish milk production 2.75 billion liters in the next five years, which means adding 300,000 dairy cows to farms; there are 1.1 million cows being milked in Ireland presently. This might mean more chemical fertilizers and more silage, which could possibly uproot the current landscape and economy in rural Ireland. Many of those observing the dairy industry also believe that the current conditions could lead to a “bubble” – where farmers would be left with bank loans and rapidly decreasing incomes, a comparable scenario to the future of college loans in America. Another concern that is entirely out of control of dairy producers is the ever changing weather patterns and climate. Climate change has brought unpredictable and often severe weather patterns to many regions of the world since the turn of the 21st century. The FAO/OCED Agricultural Outlook 2011-2020 Report states, “the most frequent and significant factor causing volatility is unpredictable weather conditions.” What may be worse is that by 2025, two-thirds of the world’s population will be living under water stress conditions. What that essentially means is that the surrounding water for certain people may not be able to meet the human and ecological demand for water, in regards to water quality, environmental flows, and accessibility. Only to worsen the problem, agriculture uses 70% of the world’s freshwater, so those in the dairy industry may only be feeding their own problem.

 

What does the future hold?

The future of the dairy industry, although undoubtedly hampered by unforeseeable circumstances, looks very bright in the near future. In 2025, it is predicted that dairy products will account for 45% of all total food and drink exports on a global level. Currently, €35 million is being spent on innovation investments that will look to expand and help the efficiency of the dairy market in Ireland. The first initiative, worth €25 million, is funded by the Dairy Processing Technology Center which is supported by the Department of Jobs through Enterprise Ireland and the University of Limerick. The next initiative, worth €10 million, is an investment by Teagasc and dairy industry shareholders in the expansion of Moorepark Technology Ltd. in Cork. Both of these investments look to prepare Irish dairy farms for the continuing rapid growth of dairy exports out of the country. 7 out of the 10 major dairy producers in Ireland are investing in major initiatives to adapt to the booming demand. Most of this demand is coming from emerging and foreign markets, with very little of it coming from domestic consumers. Counties such as India, Saudi Arabia, and China will see global dairy consumption increase by 43.9%, 41.9%, and 33%, respectively, by 2023. With 3 billion consumers to join the middle class from 2010-2030, and almost 60% of people to be living in cities in 2025, milk sales should continue to increase since milk sells the most in city populations, and among the middle class. China will continue to be critical to the success of the Irish dairy industry, with the rising import demand for dairy products to continue, not to mention that their per capita consumption is less than one-third of the world average. They certainly have room to grow, and will seemingly continue their large dependence on foreign dairy producers. However, the end of milk quotas that allows for limitless production may bring along with it some negative prospects (see this excellent video by Cliff Taylor of the Irish Times: http://www.irishtimes.com/news/ireland/irish-news/cliff-taylor-dairy-industry-faces-opportunity-and-volatility-1.2131200)

 

Evan M. Carvalho

International Trade Associate

World Trade Centre Dublin

Sources for blog:

http://www.agriculture.gov.ie/media/migration/customerservice/dairyconference/Session1Presentation211114.pdf

https://www.agriculture.gov.ie/media/migration/ruralenvironment/ruraldevelopment/ruraldevelopmentprogramme2014-2020/representativebodies/IrishOrganicMilkProducersLtd.pdf

http://www.fdii.ie/idia

http://www.icos.ie/members/dairy/

http://www.irishtimes.com/life-and-style/food-and-drink/milking-it-what-s-in-store-for-the-irish-dairy-industry-when-quotas-end-1.2125762

http://pacinst.org/water-definitions/