Dairy Sector

Vision for the Irish Dairy Sector

To be the word's most trusted exported of sustainably driven and technically advanced high quality dairy products to customers worldwide.

Sector Summary

Ireland’s dairy industry is built on the tradition of cattle grazing outdoors on grassland pasture for up to nine months of the year on family-owned farms, often passed down from generation to generation. Indeed, it has been found that Irish dairy herds enjoy on average 240 days per year out on pasture, with 95% of their diet consisting of grass. This outdoor grazing system enables Irish dairy to be one of the most environmentally efficient in the world with a carbon footprint of 0.97kg CO2e per kg FPCM*.

These 17,000 farms have an average herd size of 91 cows and an average size of 55 hectares. Ireland has the longest grass growing season in the northern hemisphere. This advantage is bestowed on the country by virtue of its island location on the western edge of Europe, with a temperate climate, plentiful rainfall and rich deep soils. Ireland has a population of just over five million people, yet it produces enough dairy to feed multiples of it. Our dairy production is focused on cheese, butter, powders and dairy ingredients.

Sustainable Growth 

Irish dairy exports reached a record value of €6.8 billion in 2022 representing 33% growth versus 2021 with over 1.7 million tonnes of product shipped to over 130 markets worldwide.

The foundation for this 33% growth was a solid year in milk collections on Irish farms, estimating to be close to 2021 levels at approximately 8.7 billion litres for the year. This was despite evidence of lower fertiliser usage and relatively slow grass growth in the spring and early summer.

Despite the strength of this overall performance, 2022 presented a particularly challenging year in the form of increasing inflationary pressures.

Muted buyer activity in some key import regions and continued uncertainty exacerbated by the war in Ukraine are factors which will impact on prospects further into 2023.

Drivers of Dairy Performance

Butter

Butter exports increased by 26% or €270 million in 2022 to a record value of approximately €1.32 billion. The EU, United Kingdom and North America remain the key markets for this product, accounting for 95% of exports. 

The EU Milk Market Observatory reported a range of €5,800 - €7,200 per tonne of butter traded over the year with prices sustaining over €7,000 from May to September. The comparable range in 2021 was from €3,400 to €5,800 presenting significant value increases in 2022 for Irish butter exports.

Cheese

Cheese exports increased by an estimated €260 million in 2022 to a record value of approximately €1.3 billion, rising by 25% on 2021's figures. EU markets accounte

d for over half of this growth with strong trade to France,Netherlands and Germany, fulfillingdemand based on lower local supply. Spain and Belgium also performed very strongly from an Irish cheddar exports perspective; rising by approximately 40% and 70% respectively.

Fat filled milk powder (FFMP)

Exports of FFMP increased by an estimated €230 million in 2022 to a value of approximately €920 million, 34% up on a relatively slow performance in 2021. 

With volumes shipped 15% lower than on 2020, values were driven by significantly higher input costs in terms of skim milk powder (SMP) and vegetable oils being reflected in global pricing for finished product.

Strong energy prices, coupled with a strong dollar versus euro exchange rate offered favourable trading conditions into the key west Africa markets of Nigeria, Senegal, and Ghana. There were some indications of slower demand toward the end of the year, perhaps signifying an affordability challenge starting to impact on consumption.

Specialised nutritional powders 

Exports of specialised nutritional powders increased by an estimated €70 million in 2022 to a value of approximately €730 million, 11% up on 2021's figures and arresting a five-year trend of declining export value. 

Production challenges in the United States served to drive import demand there and across the globe. Ireland benefited from this directly with the value of trade to the market more than three times 2021 levels. This one-off activity is, however, unlikely to be repeated in 2023.

Casein

Exports of casein powders increased by €320 million in 2022 to a value of approximately €790 million, 68% up on 2021's figures and affirming the strategic decisions the Irish dairy industry has made in investing in the manufacture of this product. 

Prospects 

Looking forward to 2023 it is expected that Irish dairy supply will be modestly ahead of 2022. Increased availability of fertisliser early in the year and favourable weather conditions would provide support to volumes.

Volatility in energy costs and availability of labour will be other factors that may influence production decisions.

Environmental considerations, and indeed regulations, are playing a more prominent role in the direction of dairy production globally. Dutch farmers took to the streets in 2022 to protest at their government’s plans to cut nitrogen use by 50% by 2030. New Zealand has announced plans to apply a levy on methane emissions from livestock as part of their national climate efforts. Although not signed into law yet this is likely to feed into farmer sentiment and could provide some of the context as to why the USDA is predicting a further modest reduction in New Zealand supply.

The European Commission is predicting that EU milk collections will continue to decline marginally in 2023, although fat and protein levels should improve to counter this deficit.

Affordability will also be a challenge on the Business to Business (B2B) and manufacturing side of dairy exports, notably regarding FFMP and SMP. There was evidence of reducing volumes into west and north Africa in the latter half of 2022. Parts of Southeast Asia and Middle East will also be exposed to these challenges.

Overall, 2023 looks to be a year of both challenge and opportunity for the Irish dairy industry. The prospect of a modest increase in milk supply against a potentially lower global supply is positive. These prospects are tempered however, by an uncertain global economic forecast and its impact on consumer spending and the ongoing cost and input availability pressures facing farmers and processors. It remains to be seen how commodity prices respond to these challenges in 2023. On a positive note, the diversified nature of the Irish dairy industry in
terms of product output and markets served, not to mention its agility and sustainability credentials, positions it well to navigate these factors over the coming year.