Increasing production scale for Irish dairy farms is key to boosting the global competitive position of the industry, according to a new study by the Irish food authority.
Teagasc, the Irish Agriculture and Food development Authority examined milk production in the EU, New Zealand, the US and Argentina.
When analysed over the 1996 to 2010 period, the study showed that on average, Irish dairy farming continues to be among the most competitive compared to the other EU 15 countries examined, said the authority.
“This is a positive indication for the relative competitive position of the Irish dairy sector over time,” said Teagasc.
Importance of size
However, at a global level, the report found that competitors such as New Zealand and Argentina continue to have lower production costs per unit of product than Ireland, although larger Irish farms remain quite competitive globally.
“When additional costs are factored in to cover the operator’s owned land, labour and capital, the Irish dairy sector’s performance is less impressive. The most significant charge included in total economic costs is for owned land,” said Teagasc.
The authority said economic costs on larger Irish dairy farms were substantially reduced compared to the average Irish dairy farms.
“This result is indicative of the small scale farming that is predominant in the Irish dairy industry relative to competing industries,” said the authority, adding that the competitive position of the average size Irish dairy farm is likely to become an increasing cause for concern.
“It could be concluded that larger scale producers in Ireland will be in a superior competitive position relative to the smaller scale producers in the long run, due to their ability to cope with a cost/price squeeze.”
Trevor Donnellan, one of the authors of the report, said that the end of the quota system may provide the opportunity to increase production, farm size and scale of processing facilities.
The analysis was based on two main data sources – the EU Farm Accountancy Data Network (FADN) for years 1996-2010 and the International Farm Comparisons Network (IFCN) between 2004-2010.