Exports to over 110 countries worldwide
Circa €2.5 billion turnover
Ireland’s largest dairy product exporter
Proud owner of Kerrygold
2015 will be remembered for being a challenging year across the world’s major dairy-producing regions.
Difficulties resulting from growing milk supply, demand weakness and falling prices continued throughout the year. With the exception of New Zealand, global milk supply in the major milk producing regions grew by 1.4% in 2015. The rate of global growth has slowed, but supplies remain at high levels due to strong cumulative year-on-year growth since 2013. EU growth has been particularly robust, increasing by 2.5% or 3.5 billion litres in 2015.
Closer to home, milk supplies in Ireland were up 13.3%, with favourable pasture conditions in the latter half of the year contributing to higher than expected milk flows. Growth rates in the Netherlands (6.9%) and the UK (2.7%) were also strong. While Irish growth rates were higher than any other EU country, it is worth noting that Germany, France, the UK and the Netherlands have all produced more milk than Ireland in volume terms since 2013.
Weakened purchases continued in Russia and China – two of dairy’s most important import markets. Political difficulties closed the Russian market to EU and US dairy trade in August 2014. The Russian market previously accounted for more than 30% of EU cheese exports and 28% of butter exports.
The economic slowdown in China delayed the expected return of dairy buyers in 2015. While there was evidence of demand growth, particularly for infant formula, Chinese WMP imports for the year were down 50% on 2014 levels and down almost 80% on 2013.
Despite weak demand from Russia and China, the EU’s export performance remains strong. While EU cheese exports fell slightly, butter and powder exports increased as exporters were successful in finding replacement markets (albeit lower-paying markets), particularly in the Middle East and North African regions (MENA). However, the sharp decline in oil prices in recent months dealt a further blow to global dairy demand, specifically in oil-producing MENA regions whose buying power has been reduced as a result.
A combination of strong supply and demand weakness led to global prices falling further during the year. With dairy commodities losing almost 50% of their value by the end of 2014, prices fell by a further 20% in 2015. The Ornua Purchase Price Index (PPI) averaged at 93.5 points for the year, reflecting the sharp decline in global dairy prices since 2014.
A small pick-up in both demand and price has been forecast for the second half of 2016, although global prices are likely to remain low for the remainder of 2016. While there is some milk supply constraint in Oceania and the US, this is counteracted by exceptionally strong milk supply in the EU. As such, a decline in EU supply and increased demand from the Russian, Chinese and/or MENA markets will be required to correct the market and bring about a significant price improvement in the short to medium term.
* Source: www.clal.it, http://ec.europa.eu
* Source: GTIS
* Source: ZMB