The lobbying efforts by both Dairy UK and the Ulster Farmers Union to urge the reintroduction of export refunds were outlined by Mike Johnston, Chief Executive of Dairy UK when he addressed a recent meeting of the NI Grain Trade Association. He said “Dairy UK and UFU have been lobbying local, national and EU politicians to urge the reintroduction of export refunds as a means of trying to put a floor in markets that continue to fall.  Unfortunately the EU has not so far accepted the case for export refunds, and as markets continue to fall, the outlook is for continuing market volatility and uncertainty.”

Mike also  gave a detailed background to the current situation in Northern Ireland and in European and world markets. He pointed out that from 2000 to the end of 2007, milk production in Northern Ireland increased by 21%, compared with a fall in overall UK production of 4%.  Current milk production is running at around 5% below 2007 levels, whereas milk production in other countries has been increasing.  This has been most noticeable in USA, Argentina and New Zealand. 

Milk utilisation in Northern Ireland differs significantly to the rest of the UK.  In Northern Ireland, the liquid market accounts for 20% of production that is processed locally, although a proportion of this is exported to the Republic of Ireland as pasteurised milk.  Of the remainder, over 50% is manufactured into milk powder, and over a quarter goes into cheese.  In the UK as a whole, 50% of milk is used in the liquid market, with only some 12% being manufactured into powder, and almost 30% going into cheese.  This means that Northern Ireland is much more dependent on export markets compared with the rest of the UK, and, indeed, other parts of EU. 

Since 2001 global milk production has been increasing, and in parallel, demand for dairy products has also been increasing.  In 2003, however, supply and demand came into balance, and for the next 3 years demand outstripped supply, with the result that global stocks of dairy products decreased significantly, and in some areas, such as the EU, disappeared.  The result was upward pressure on prices during 2007.  During 2008 this position reversed, with demand falling and supply continuing to increase, and stocks of dairy products increasing, causing downward pressure on prices.  Evidence of this is most stark in the prices yielded for milk powder in Fonterra’s auction.  Introduced in July 2008, the auction price for whole milk powder was $4395 per tonne, but by December the auction price had fallen by almost 50%.

Although milk production in many EU member states is falling, demand for milk powder is poor, and this is being reflected in falling prices.  Unfortunately, at present, the outlook is for continuing market volatility and uncertainty.