This post first appeared online at http://www.thatsfarming.com on the 15th September 2017
Last week saw the opening of a new milk dryer; it would provide economies of scale and strengthen the capacity of the co-operative to supply ingredients. What caught my eye, however, was the celebration of the 80-odd new jobs that it would create. Is it a reason to celebrate?
Typically, a milk dryer needs a staff of about fifty people. As they require the centralization of hundreds of millions of litres of milk, they inevitably create a few more jobs in the haulage sector. The presence of the new dryer should also enhance the economic future of the milk suppliers.
This is not the first new dryer in Ireland to be commissioned in the immediate past. Indeed, much of Ireland’s post-quota, expansion-milk has been dried. We should now begin to see the success of these investments reflected in the farm-gate milk price.
The milk processors ability to deliver a farm-gate price that can sustain its suppliers will depend on its product mix. How much will be sold as finished products and how much will be ingredients for others to convert into consumer-facing, branded products?
Infant formula is so often cited as a flagship product for the Irish dairy industry. Is it really such or is it a formulated product manufactured in Ireland that needs ingredients from multiple countries? Finally, from judging by recent press articles, it is at last being realized that its production, sales and branding is controlled by a handful of multi-nationals. The co-operatives owned by Irish farmers produce some of the ingredients but the profits go elsewhere in the supply chain.
Just how much does the major growth in infant formula exports to China benefit farmers? If one scratches the surface, one would probably find examples across a myriad of food businesses; the Irish dairy farmer does the heavy lifting whilst others take the cream from their milk.
Given the recent massive investment in expanding milk production and processing the additional milk, this is now the de facto position. What is done is done, the money is spent and dairy farmers and their co-operatives are committed to a course of action.
When dairy expansion was advocated, we were told that it would create employment. It does appear to be creating a demand for milkers, but few seem to want to provide their labour, at least at the salaries offered. In a functioning labour market, pay should now rise to bring labour into the sector. That of course assumes that a labour shortage creates a milk shortage and a milk price. That is not happening; thus, leaving the individual farmer to work harder to fill the shortfall. It is an inevitable consequence of the supply-driven rather than market led expansion model chosen.
With an emphasis on milk for milk powders Ireland has chosen to follow a New Zealand approach that has been effective for NZ during the Chinese-market expansion years. It was facilitated by NZ’s trade agreement with China.
To compare the prime numbers in NZ’s South Island expansion regions of Canterbury and Southland with Ireland is a sobering exercise. At is simplest, the average herd size is around 800 cows in Canterbury and 600 Southland. That is around 8-10 times greater than Ireland. Labour productivity in the NZ regions is around 180 cows per person, probably about three times that in Ireland. Hence, beyond grass, where was the logic in entering the same commodity markets as New Zealand?
A novel key performance indicator to consider is the milk processed per person employed in processing. For Canterbury, it was 3,500,000 litres rising to 3,900,000 in Southland. From a rural employment perspective, milk dryers are not exactly great creators of rural jobs! In the European artisan sector, one could probably find jobs that require a fiftieth of a differentiated milk type. It will be the same in Ireland, 80-plus jobs are not a massive return for the milk processed or, for that matter, the investment made. If you are wanting to highlight job creation, don’t dry milk.
The rural population density in South Island is about a 1/10th of that in Ireland and in Southland a lot less than that so are milk-processing jobs vital sources of rural employment in NZ? One could argue that given the response to Ireland’s current need for milkers, there is full employment in rural Ireland but one suspects not. Maybe it is that dairy expansion is creating the wrong jobs?
Hence, should we have been focusing on creating rural jobs in milk processing rather than in the milking parlour? Should we have been focusing on value-added and higher-value as opposed to more milk for centralized and automated processing? Should we have been focusing on maximising the farm-gate value of milk, lowering the volume needed for viability, and thus reducing and not increasing the pressure on those doing the milking? The current situation suggests that we need a farming and processing system that needs less milkers, not more.
Rural Ireland needs jobs and its family farms need off-farm income and we need to take a long hard look at whether these should not actually be coming from milk and food processing. Maybe we will discover that they are no more attractive occupations than milking, but we should find out.
It is a radical suggestion given that local processing will mean different products and alterations to the milk supply side, but it is one that needs investigating. The alternative is just to accept that the future of Ireland family-owned dairy farms is entirely tied to the milk for milk powder strategy; an approach that will also not provide many wider benefits to the country’s rural communities.