Dairy Performance & Prospects Summary

Liam McCabe, Sector Manager Dairy Specialist

 Irish dairy exports performed positively in 2021 with exports exceeding €5 billion for the third year in a row. Strong market returns across the core categories of butter, cheese, and powders coupled with a diversified market spread helped sustain strong demand during the year. From a regional perspective North America and Africa performed particularly well, countering the softer demand for infant foods in Asia. This positive performance was delivered against a backdrop of ongoing global supply chain disruption as well as soaring input, processing, and logistical costs.

Reduced milk output from major European producers like France, Germany and the Netherlands coupled with strong demand for ingredients particularly from China all led to a positive market environment for much of the year. Butter and cheese exports, which typically account for approximately 40% of all dairy exports both recorded growth with strong demand for casein and whey also contributing positively to export values. Combined these four sectors are estimated to have contributed an additional over €300 million of exports during the year.

Reduced demand for imported finished and base powders to Asia for the infant nutrition sector proved to be a headwind in countering overall Irish dairy growth with exports in this category declining by an estimated €220 million. When this category is excluded, Irish dairy exports to Asia grew by approximately 30% or €100 million in 2021. Fat filled milk powder recorded an estimated €160 million decline (-19%) year-on-year in part owing to the industry’s strategic utilisation of the milk pool to maximise value return. However, exports of finished product to Africa grew by 20% driven by improved economic conditions in key West African markets.

From a destination perspective, trade was recorded to 147 markets with 2021 the first year where exports of Irish dairy to markets outside of the EU and UK exceeded 50% of all exports. Greatest growth gains were seen in North America (+€90 million) and Africa (+€74 million) in the year whereas Asia and Europe were impacted by direct and indirect demand for infant food and fat-filled milk powders. It should be noted, however, that when these products are excluded both regions demonstrated significant growth. Exports to the United Kingdom were in line with 2020 values, at €926 million, a positive performance given high inventories in the market at the start of the year.

The outlook for quarter one and into quarter two of 2022 remains positive as, at the turn of the year buyers seek to secure product amid weaker European and Oceania milk output. These factors combined, will assist in sustaining high dairy prices into the New Year. For quarter three and beyond, there is a sense of cautious optimism with Chinese demand levels set to be a key influencer as will the extent to which global economic activity, consumer demand and consumption levels through the much disrupted food service channel return to normal. Factoring in the backdrop of anticipated weak milk production across the main exporting regions and in Europe in particular, prospects for Irish dairy exports remain broadly positive as we head into 2022.