Irish dairy exports saw a modest decline on 2022’s record-breaking performance when dairy exports rose to €6.8bn (+33%) in value terms on the back of high farmgate milk prices and strong milk production.
But with global trade experiencing a decline throughout 2023, Irish dairy exports also slipped – by around 8% to €6.3bn in value terms, as revealed in the Irish Food Board’s (Board Bia) annual export performance report. A combined increase of 6% in the value of cheese, specialized nutritional powders and yogurt helped to partially offset the overall declined, said Bord Bia but noted that 2023’s result was still 22% ahead of 2021’s export performance.
David Kennedy, Bord Bia head of dairy, explained this year’s dip in dairy exports with the oversupply situation that materialized in 2023 and the bearish global commodity markets. “If you think back to the second half of 2022, we saw high farmgate prices across the world on milk, which led to increased supply,” he said. “That increased supply meant that we started this year globally with high stocks and expensive stocks of dairy commodity products. These products struggled to work their way through the supply chain, as the cost of living crisis meant that affordability was a real challenge for the global consumers. We saw this in Europe where butter and cheese sales in retail were challenged, and indeed North America and Southeast Asia and West Africa.”
Butter (€1.3bn), cheese (€1.2bn) and whey ($250m) made up 45% of the total dairy export volume, with Kennedy stating all three commodities suffered price declines in 2023. “2022 was an unbelievable year for butter, with EU prices of around €7,000 per ton available throughout the second half of the year. Coming into 2023, those prices are back to €4,000-€5,000 per ton, so a significant fall-back there. Equivalent prices on cheese, 25% back on 2022 prices and then SMP, 40% back on 2022 prices.
“There’s no surprise with this whole portfolio back on prices in value terms that the overall export performance was challenged.”
Irish butter exports continue to grow in the US
Dairy exports to the EU slipped 9% in 2023 to a value of €2.2bn and North America also declined 8% to a value of €750m, with Asia (-3%) and Africa (-16%) also down on 2022.
However, Irish butter exports to the US continued to increase, growing more than 10% in the first 9 months of 2023. According to the US International Trade Commissions, increased Irish butter imports over the years have been driven by Ireland’s reputation for premium dairy and natural grass-fed production. Ornua’s Kerrygold is thought to be among the largest butter brands in the US market at the end of 2023, second only to Land O’Lakes.
Exports to Southeast Asia were mixed, with Kennedy noting that cheese volumes in Japan had been maintained, highlighting this as a positive for what he described as a ‘really important’ market for Irish cheese outside of Europe.
The Middle East also performed favorably, with the value of Irish dairy exports growing 24% to €390m. Retail sales in Saudi Arabia are thought to be a key driver in the region.
Demand from China expected to return in 2024
Bord Bia’s head of dairy said there was a likelihood that demand from China could finally begin to return in 2024. “Interestingly in China, despite an overall downturn in import demand, we saw some solidity to the infant formula export figures versus previous years, perhaps indicating that the declines we have seen in the last few years have come to a slower stop.
“It is predicted that markets like China should arrest its decline in terms of demand and start to come back.”
Looking ahead into 2024, Kennedy expects last year’s challenges to be lessened this year. “I believe that global stocks are lower than they were in 2023 and the stocks are more affordable than they were coming into 2023,” he said. “We expect to see increased consumption of butter, cheese in those key retailer and foodservice markets.”
Demand for environmentally-sound dairy products is also likely to remain a sustainable trend, Kennedy predicts. “We are increasingly seeing demand from international customers for low-carbon footprint, highly sustainable dairy ingredients. This is something Irish dairy exports can leverage to the advantage of our farmers through the year.
“Irish dairy has demonstrated its diversified market portfolio and shown its resilience so after surviving a very tough 2023, I’ve great confidence that Irish dairy can grow in 2024.”
Dairy wasn’t the only food export segment that recorded a decline in 2023 - Ireland’s overall food, drink and horticulture exports were down 4% on 2022, with meat (-1%), processed foods (-7%), beverages (-8%), seafood (-14%), and cereals and horticulture (-6%) also declining.
Nevertheless, chief executive Jim O’Toole said Bord Bia remains optimistic about the future as the body looks to launch a new four-year strategy later this year. He reported that confidence in European and Americas markets is the strongest, with almost 70% of exporters believing some level of expansion can be achieved in these territories.
Some challenges remain however, with global economic growth still projected to decline in 2024 and the combination of inflation and interest rates likely to affect consumer sentiment and spending power.
“Later this year, Bord Bia will be launching a new four-year strategy,” he said. In devising that strategy, we look to the future with optimism, despite ongoing challenges and uncertainty. We intend to maintain our steady course and continue to build on our strengths in the area of sustainability.”