Irish dairy industry challenges

In addition to global market volatility challenges and tariffs, the Irish dairy industry faces major constraints deriving from environmental regulation alongside rising costs associated with energy and national decarbonisation requirements.
Without Government intervention to counterbalance Government-policy-imposed costs, this combination of increased costs – on farm and in processing – will be paid for in ever reducing milk prices. This is because, as I have previously pointed out, dairy companies do not have selling power and cannot pass on some of those costs to customers by increasing their prices – unlike branded drinks companies or energy suppliers.
Without support, this will lead, inevitably, to further output reductions, falling job numbers and exports, and restricted spending on research and development (R&D), over time. Unlike the energy and pharma sectors, for example, all of the price, income, and weather/climate volatility in milk production and marketing are carried exclusively by farmers/dairy processors currently.

The dairy industry has demonstrated a tremendous capability to market all the additional production delivered since quota abolition without subsidies, increasing the value of dairy exports to more than €7bn (€7.3bn in 2025). So, to maintain Irish dairy’s substantial and unique economic impact – as highlighted by the aforementioned EY report – a blend of targeted policy interventions and financial supports is essential.

Requirements

Addressing the current challenges and, thereby, underpinning the social and economic impact of the dairy sector requires a combination of access to long-term investment capital. It also requires support through grant aid from Enterprise Ireland, for example, that must be targeted and specific to Irish dairy-sector needs.
The decarbonisation transition of the energy sector, which is still ongoing, was and is incentivised by huge capital supports and long-term price/tariff guarantees by Government.
Current pricing practices and export market competition mean that the dairy sector cannot recover investment and decarbonisation costs through increased prices, so Government support is essential. The current Common Agricultural Policy (CAP) provides very little, if any, support for the dairy sector, and there is no discussion regarding crop insurance support to combat price volatility at EU level.
In addition to incentives focused on achieving scale and new product development, the core of a 2026 dairy development programme must address the twin elements of uncompetitive and rising energy and decarbonisation regulation costs on farm, and in the processing sector.
Moreover, given the predicted high cost of green energy in the future in Ireland, in addition to increased support for the huge capital cost of decarbonisation at plant level, a ‘contracts for difference’ (CfD), or equivalent energy price subsidy, will be required on a medium-to-long-term basis, as is happening across a large number of EU Member States.

Cows and carbon

While there is significant current spend on research into enteric fermentation, an accelerator fund is vital to speed up the adoption of any new technology. This is not just to meet national targets, but also to combat the seemingly relentless pursuit of herd depopulation by certain entities through judicial reviews and other legal actions.
Action must also be taken to remove the current planning and financial roadblocks to expanding renewable energy infrastructure into the biomethane sector/anaerobic digesters.
In reality, many of the planning and funding/policy constraints on developing the biomethane sector – as I see it – are driven by a disingenuous view that decarbonisation should focus solely on herd depopulation. Oddly, it seems to be lost on people that improved delivery in the biomethane sector will reduce carbon emissions but will not necessarily require herd-number reductions! On the question of R&D funding, it must be available and focussed on the commercialisation of new products or processes because, quite frankly, the industry doesn’t have 20 years to see new products or technologies reach a commercial stage!

Consolidation?

The key proposal of the 2003 Prospectus report, which I mentioned in a previous article, focussed on the need to increase scale and reduce costs to position the sector to withstand international competition and increase our penetration of high value EU consumer markets. It also included a specific recommendation that a merged pan industry drying facility should handle 70 per cent, or more, of total output.
It is difficult to see a national dryer/consolidated processing facility emerge not least because of the huge investment by the likes of Tirlán, in particular, and Dairygold, Carbery and Lakeland etc. over the last few years to support dairy expansion, plus the marketing capability of Ornua.
Clearly, Ireland Inc. does not have the comparative scale in dairy processing of other EU Member States or across the global markets where Irish dairy products compete. But in the hierarchy of constraints and given the politics involved I would be concerned that too much time and effort  would be spent  on a large scale consolidation move when very real and immediate challenges like managing environmental and energy/decarbonisation constraints AND meaningfully accessing competitive long-term investment capital might be missed.