Development of an efficient milk production profile of the Irish dairy Industry

Abstract

Fluctuation around milk price will be the biggest factor that the dairy industry will experience over the next number of years. This fluctuation is being driven by fluctuation on the world dairy markets. In the past, when intervention was a much bigger feature of the CAP regime, the fluctuation in world markets had little effect on the EU price. This was because the Intervention system bought product from the market when prices were depressed and placed products on the world market when the price rose. This in effect meant that the CAP regime was having a regulatory effect on the world market as well as the EU markets. An example of the type of fluctuation observed on the world market can be gleamed from the Fonterra milk price in 2006-2007 ($4.50/kg (MS) milk solid) versus 2007-2008 ($7.90/kg MS). This corresponds to a 76% increase in price in 1 year. For the Dairy Industry in Ireland to prosper under these conditions all sectors will be required to be as efficient as possible from the farm, processing and marketing sectors. This report deals with; (1) Milk payment (2) Optimum milk production systems and (3) Seasonality of milk supply. (1) Milk payment systems in Ireland currently do not adequately reward high solids quality milk. Virtually all milk payment systems include a positive constant which reward the production of volume rather than the production of protein and fat kilograms. The A+B-C system of milk payment would adequately reward the production of protein and fat while at the same time correcting for the volume related processing costs. (2) Optimum systems of milk production will be built around the maximization of grass utilization in the future. Grazed grass is the cheapest feed that can be fed to dairy cows. Stocking rates nationally are 1.74cows/Ha around the milking platform and therefore when dairy farms are expanding they should do so by increasing stocking rate. The inclusion of supplementary feeds will reduce profitability for the vast majority of dairy farmers and could only possibly lead to increases in profitability when coupled increases in stocking rate. (3) Grass based systems while substantially reducing costs at farm level result in a seasonal milk supply profile. This results in a reduced capacity utilization of the milk processing facilities as well as restricted product port folio. However the production of Winter milk will lead to significant cost increases at farm level and should only be encouraged if the specific product produced would be sufficient to cover the additional costs associated with over winter production. Within spring calving systems milk payment systems should be used to encourage an efficient milk supply profile with a mean compact calving date of mid February.