Whither the Irish dairy sector?

Over the course of three articles, I will attempt to examine the context and policy/investment challenges presented by the regulatory constraints on Irish dairy. Previous reviews of the Irish dairy industry development have focused on rationalisation and mergers, product development, the butter versus cheese product mix, innovation/R&D and, particularly in the 1980/1990s, improved access to investment capital which created the dairy PLC concept. The current output constraints are largely influenced by Irish policy rather than EU milk quota policy.
Before we look at rationalisation or investment support options it’s important to emphasise that these constraints, as they currently stand, will diminish the Irish economic impact of the dairy sector. This will happen while – as verified by the Organisation for Economic Co-operation and Development (OECD) – emissions from global dairy production will rise, as Ireland’s low-carbon, grass-production system is replaced by low-regulation production internationally as global dairy demand continues to rise.

Missing the demand opportunity

In national policy terms, we seem to have swung completely from a dairy-growth policy that was accused of being blind to environmental impact to an ‘environment first and last’ policy that seems blind to both detrimental global emissions and the local economic impact of constraining Irish dairy output. This should be recognised for what it is; a missed opportunity for economic expansion and job creation. And, ultimately, if the restraint policies continue, it will lead to a decline in output and jobs, particularly impacting the Irish rural economy.

Inertia has replaced forward momentum

Following the surge in Irish milk output after EU milk quota abolition in 2015, milk deliveries in Ireland peaked in 2022 at 8.8 billion litres and declined over the following two years with a recovery to 8.8 billion litres in 2025.

While weather conditions have played a part, the base-level production constraint is very real, with a number of state bodies and government departments still insisting that Irish dairy cow numbers are targeted for reduction as part of a broad national decarbonisation policy.
Two key points are often missed when examining the increase in milk output between 2015 and 2022. Dairy growth has delivered a huge and continuous contribution to the real Irish economy with exports increasing in value from €2 billion to €6 billion per year in value over the 10-year period from 2015 to 2025, while Irish economic expenditure tripled in value also to over €5 billion annually.
In addition, the Irish dairy sector succeeded in marketing all four billion litres of this increased production without subsidy, reflecting not just the capability of the sector but also the huge and ever-increasing global demand for Irish grass-based dairy products. This latter point is a tribute to the capability of dairy processors and marketeers and a reflection of the ever increasing demand for Ireland’s grass based dairy output in a global market where consumer awareness of sustainability challenges is evolving.

Ideology trumping economic opportunity

Moreover, unlike the official EU regulated quota agreed in 1984, this current quota is, first and foremost, driven by domestic political policy and environmental ideology deriving from a combination of sectoral carbon-emissions-reduction targets, and the constrained stocking rate numbers implied by the new Nitrates Directive.
As we know, this constraint on production and output could get even more drastic if the An Taisce legal case against the directive were to succeed, with production required to reduce from the current 8.5-9.5 billion litre range to below six billion litres. Additionally, this production constraint comes on top of huge increases in dairy-processing costs through energy price and processing de-carbonisation requirements.
As signalled by the decision a few years ago of Nestlé to close its Wyeth Nutritionals infant formula business in Askeaton, Ireland is a very high-cost location for any form of manufacturing that uses mostly indigenous raw materials, people or services. In plain speaking terms, current Irish industrial development policy is much more ‘business friendly’ for global businesses with a minimal Irish economic footprint, ‘super-normal profit levels’ or inter-company global transfers, than to those companies such as dairy processors that use local Irish raw materials, people and services and have a huge multiplier impact on the local and national economy.
So, if milk output is diminished further, this resulting reduction in Irish economic output, jobs and value-added will not be seamlessly compensated for by increased inward investment from the foreign-direct-investment (FDI) sector. This regulatory-based reduction in dairy and meat output is not going to ‘free up’ or relaunch a surge in plant-based production as a substitute, either.

Debunking myths

Only by debunking this plant-based myth and focusing on maximising real Irish economic impacts is an objective assessment of industrial development options likely to deliver a set of policy and investment measures that are a true fit for future Irish agricultural development.
With that purpose in mind, I would suggest that the core question for the Irish dairy sector should be: what would it take for you to sustain or expand your business’s economic footprint in the Irish economy? This is a question, I would suggest, has not been put to an indigenous Irish company in recent years.