The global dairy market is experiencing “significant downward pressure,” according to Pat Murphy, the CEO of Kerry Group’s dairy division. Murphy, who heads up Dairy Ireland, said that further milk price cuts are possible. However, he also expressed hope that the markets would improve in the second half of this year as demand for supply is anticipated to increase. Murphy explained that there was a “big increase in milk output” during the last six months of 2022 worldwide, and these stocks are still working their way through the supply chain.
“Because prices went so high last year in terms of dairy, it encouraged farmers to produce more milk. That supply now is hitting the markets. So over the last number of months, the demand has come back because prices got a bit expensive on the retail shelves,” Murphy said. He added that with inflation now running as it is and the cost of living crisis across the world, the consumer has less spending power, which is being reflected in what is being bought on supermarket shelves.
Murphy noted that “stocks with our customers across the world have been high over the last number of months, especially in quarter four last year.” He added that “we’re seeing those inventories now reducing, and so as they reduce, buyers will have to come back out and start buying again, and we’ve seen a little bit of pick-up over the last couple of weeks.” However, he also warned that “there is still unfortunately a little bit of more downward pressure coming in the immediate couple of months.”
Base milk prices for Irish farmers have been cut by 16c/L over the past three months. When asked if farmers can expect to see more reductions in their upcoming milk cheques, Murphy responded, “It’s hard to know at the moment, I would say yes. There are significant inventories across the globe of skim milk powder, butter, and cheese. I think we will see further downward pressure over the coming weeks and the next couple of months.” He added that “things can change very quickly, if supply comes back across America and Europe, we might see a rebound then if demand picks up a little bit. We will see hopefully prices getting firmer again in the second half of the year.”
Edmond Scanlon, the CEO of Kerry Group, told the company’s Annual General Meeting on Thursday (April 27) that it has “strong ambitions” to grow its dairy business division “for the foreseeable future.” Murphy noted that “there is significant investment going on every year” in Kerry Group’s dairy division. The company has invested around €30 million to double the capacity of its Cheesestrings facility in Charleville, Co. Cork, which will be operational before the end of the year.
“The kid snacking market is a very important market for our consumer foods business, and there’s growth there. We will target areas where we can see value coming back in,” he said. “It’s a huge project, we have a huge team of people working on it and very optimistic about the next couple of years and how we are going to fill that factory.” Murphy told Agriland that they have “a very strong relationship” with the Kerry Co-op, but he added that no talks in relation to a potential dairy business deal are currently taking place.
The Dairy Ireland CEO also said that new proposals to ban the slaughter of calves under Bord Bia’s Sustainable Dairy Assurance Scheme (SDAS) are “very important” for the entire dairy industry. According to the latest figures from the Department of Agriculture, Food, and the Maine (DAFM), 29,756 calves have been slaughtered to date this year. “We have incorporated that proposal into our terms and conditions of the purchase for milk in Kerry,” Murphy said. “To keep producing dairy and milk in this country, we have to take on these issues as soon as possible. It’s a small number of farmers that are causing this difficulty out there. The department of agriculture knows exactly the mortality rates on these farms, so with the department and the different stakeholders, I think we can tackle this and resolve it in the next couple of years.”