Groceries Sector: Discussion with Fresh Milk Producers

Tuesday, 21 May 2013

I apologise for being a few minutes late. The producers are very welcome to this meeting. It strikes me that the liquid milk sector is like a few other sectors that are living on depreciation. One cannot invest constructively for the future if one does not have a sufficient margin. It seems strange that a country which has aspirations to feed up to 50 million people under Harvest 2020 cannot maintain a constructive and solid production base. The argument I have heard in favour of allowing farmers to take very small margins is that they are able to build up on scale. That does not always work, however. I am involved in the tillage sector, where one’s efficiency decreases as one gets larger because of land fragmentation and all that goes with it. We need sufficient headroom for investment.

When I got out of milk production in 1991, the price was 28 cent a litre. I have made that calculation by converting back from pounds. Those present will remember that the price was approximately £1 a gallon at the time. Food and milk have been used to keep our inflation figures artificially down. According to the figures we have been given today – I wonder if there is much of a difference between the normal price for milk and the price for liquid milk – the primary producer now receives 33 cent, which is an increase of just 17.8% over 22 years. The inflation figure, if I can call it that, is 0.008% per annum. No industry can survive over a period of two decades and get less than 1% inflation per year.

It is impossible. Obviously the people in milk production are miracle men and women. I do not know how they do it. It is a frightening scenario. If this is to continue for the next 20 years there will be very few solid milk producers left here. Certainly that is not the basis for going forward. It may be that an increase in population will force prices to increase. As we have seen in the tillage industry and in grain prices, 40% of the fluctuation is due to speculation. It is not related to demand at the time. How long more can the industry continue given the ridiculously low inflation level? In 1991 a tonne of fertiliser cost approximately €120, whereas today it costs €340 per tonne. These are the primary issues that are costing us money. A conacre then cost a fraction of what is costs today. We are trying to hold back the tide. What are the witnesses’ suggestions for getting a sensible return for the primary producer?