Ireland's minister for agriculture and food, Joe Walsh, has stressed the importance of investment in research and development. Speaking recently at the Moorepark food research open day, he outlined several key recommendations made in the strategic review of the dairy processing sector.
"Further increased scale and efficiency at both producer and processor levels are essential for long-term success," he said. "Reduced reliance on commodity type dairy products and greater concentration on R&D and on higher value added consumer products is required. Only by greater efficiency and addressing the needs of the market can the future of the sector be secured and enhanced."
Since the presentation of the Prospectus Report, Walsh has met most of the main players in the industry since the presentation of the report to see how the objectives and recommendations can best be achieved. "There is no argument about the need to pay greater attention to competitiveness at all levels in the industry," he said.
"In terms of processing, this has to mean increasing scale and taking more and more costs out of our operations. How scale is increased is a different matter, and there are many ways of doing this. Merging and sharing facilities as well as joint ventures need to be examined. It is also clear that we need to critically look at our current product mix to ensure we are correctly placed as an industry to exploit the market opportunities presenting themselves in an expanded EU and beyond."
Walsh said that a fundamental part of the next stage of development for the Irish dairy sector is the need to increase expenditure on R&D. "The Irish dairy sector spend on R&D amounts to 0.2 per cent of turnover compared to a figure of 0.4 per cent in Netherlands and 0.6 per cent in New Zealand."
The minister went on to compare the present situation of the industry in Ireland with that of Denmark, a country with a somewhat smaller milk quota. He referred to the major consolidation that had happened in Denmark over recent years, both at production and processing level.
Average quota size there was now about 107,000 gallons compared with about 41,000 in Ireland. One undertaking processed more than 90 per cent of the total milk pool. Commodity-type products (butter, SMP, WMP) accounted for only 22 per cent of total milk processed, compared with about 48 per cent in Ireland and as a consequence Denmark had little or no reliance on sales into intervention.
They had neither butter nor SMP in public storage while Ireland accounted for about 30 per cent of EU intervention butter stocks and about 26 per cent in the case of SMP. It was also notable that cheese production in Denmark was about three times the Irish figure.
Minister Walsh said that these comparisons showed the type of competition we faced in the market place and underlined the need for action if Ireland's industry was to remain competitive into the future. Referring to developments in EU policy in relation to the dairy sector, the minister said that the continuation of the quota regime agreed in the mid term review was a very satisfactory outcome.
"The regime, despite its restrictions, has contributed to a relatively stable environment in the sector and its extension will allow producers to plan for the future with a degree of certainty," said Walsh. He also referred to the need to look closely and urgently at how quotas are managed so that at farm level, there is an allowance for the type of restructuring needed to face the challenges ahead.
"Producers who are committed and willing to expand must be facilitated as far as it is possible to do so. For my part, I have made the decision recently to opt for the earliest possible decoupling of the dairy premium so that producers have the clearest possible perspective on the future and the process of quota restructuring will not be stalled." The Minister said that the dairy industry will have to adapt to more competitive conditions in the years ahead but expressed confidence that these challenges will be confronted in a constructive way by all concerned.
The open day was held at the Dairy Products Research Centre, and its pilot plant subsidiary, Moorepark Technology, which is celebrating its 10th anniversary. The minister pointed out that research undertaken in Moorepark, which encompasses food ingredients, beverages, dairy and consumer foods, has been of enormous benefit to the dairy and broader food industry.
"Moorepark is in a unique position in that it can provide a seamless link in the chain of R&D, from high calibre laboratory research through to process development and scale-up including, where necessary, contract manufacture for initial market supply," he said.