World dairy prices slumped to a historic low this year, the State agency responsible for promoting the industry said yesterday.
Margins on butter, cheese and skimmed milk bore the brunt of the downturn, dipping below EU intervention levels for the key summer months, the Irish Dairy Board said in its annual review of the sector.
A reduction in EU export refunds had undermined recovery and thrown into doubt the sustainability of any future upturn, it said.
With further fluctuation predicted early next year, prices are unlikely to rally in the medium term, according to Dr Noel Cawley, managing director of the board. "Existing stocks in both the EU and US, along with the reduction in the US support price for non-fat dry milk and the weaker dollar, will serve to put a cap on any significant recovery in prices," he said.
Although the market rallied moderately in the final quarter, the turnaround arrived too late to bring any measurable benefit to Irish producers, he said.
The EU Commission should manage the sector in a stable fashion at least 5 per cent above intervention rather than setting a standard below a baseline that had not increased in 20 years, Dr Cawley said.
Fall-off in demand for cheese was attributed to an upsurge in meat consumption within the EU. High start-of-year stocks and low market prices further impinged on producers.
Powdered milk also showed a sustained decline in the first half of the year.
By end-of-year, however, a resurgence of some buyer interest increased demand from the animal feed sector, while early season supply shortages in Australia and New Zealand boosted market balance.
A rise in export licence applications might inject fresh buoyancy in the European market in the first quarter of 2003, Dr Cawley added.
Last week it emerged that farming incomes dropped by 8.5 per cent on average in the Republic in the past 12 months.
Concern over the long-term viability of the dairy industry last month prompted Enterprise Ireland to urge the sector to shed its traditional reliance on commodities in favour of "functional foods", products engineered to carry an additional health benefit.
It hopes to foster joint ventures between milk suppliers in the Republic and Japan, where functional foods dominate the dairy market.
Claims by some farmers' leaders that the sector is on the brink of full-fledged recession led the Minister for Agriculture, Mr Walsh, to accuse elements within the farming lobby of attempting to talk the industry into a crisis.
Farming was a cyclical sector and a downturn eventually led into an upturn, Mr Walsh said.
