Ireland’s milk production sector relies on grass-based spring-calving systems, which facilitates cost advantages in milk production but entails a high degree of supply seasonality. Among other implications, this supply seasonality involves extra costs in the processing sector including elevated plant capacities and varying levels of resource utilisation throughout the year. If both the national raw milk production increased substantially (e.g. post-milk quota) and a high degree of seasonality persisted, extra processing capacities would be required to cope with peak supplies. Alternatively, existing capacities could be used more efficiently by distributing the milk volume more evenly during the year. In this analysis, an optimisation model was applied to analyse the costs and economies arising to an average Irish milk-processing business due to changes to the monthly distribution of milk deliveries and/or the total annual milk pool. Of the situations examined, changing from a seasonal supply prior to expansion to a smoother pattern combined with an increased milk pool emerged as the most beneficial option to the processor because both the processor’s gross surplus and the marginal producer milk price increased. In practice, it may however be the case that the extra costs arising to the producer from smoothing the milk intake distribution exceed the processor’s benefit. The interlinkages between the stages of the dairy supply chain mean that nationally, the seasonality trade-offs are complex and equivocal. Moreover, the prospective financial implications of such strategies will be dependent on the evolving and uncertain nature of international dairy markets in the post-quota environment.
N.W. Sneddon, N. Lopez-Villalobos, R.E. Hickson, S.R. Davis, U. Geary, D.J. Garrick and L. Shalloo
Maximising dairy industry profitability involves maximising product returns for a specific set of costs or minimising costs for a certain level of output. A strategy currently utilised by the New Zealand dairy industry to optimise the value of exports is to incorporate imported lactose along with local milk to maximise the production of whole milk powder (WMP) while complying with the Codex Alimentarius (Codex) standards, in addition to increasing the exported product for every litre of milk. This study investigated the impact of different product portfolio strategies on lactose requirements for the Irish and New Zealand dairy industries for current and predicted 2020 milk output projections. A mass balance processing sector model that accounts for all inputs, outputs and losses involved in dairy processing was used to simulate the processing of milk into WMP, skim milk powder (SMP), cheese, butter and fluid milk of different proportions. All scenarios investigated projected an increase in production and revenue from 2012 to 2020. Higher cheese production reduced industry lactose demand through whey processing, while scenarios reliant on an increase in the proportion of WMP were associated with increased lactose deficits.