Ultan Sherry
Irish milk levels have risen significantly since the abolition of the EU Quotas back in April this year.
In statistics released by the Central Statistics Office for August 2015, Ireland’s level of milk rose from 2.3 billion litres in the period January-May 2014 to over 2.5 billion litres in the January-May period of 2015.
That’s a rise of 6.3% on the EU scale, with only Hungary scoring a bigger rise of 7.9%.
The United Kingdom’s milk levels rose only 0.9% on the same chart, despite the ending of EU Quotas having a positive effect on dairy farmers in Northern Ireland.
However, many groups are warning that dairy farmers in Ireland will face losses in revenue this year as a result of quota abolition.
One of these groups, the Irish Creamery Milk Suppliers Association, have forecasted that family farm incomes will fall over the next ten years by as much as €20,000, depending on the rate of expansion undertaken by dairy farmers.
This coincides with the mid-year report by Teagasc in July, which estimated that dairy farm income was likely to be down 40% for 2015.
SOURCE BELOW: IRISH CREAMERY MILK SUPPLIERS ASSOCIATION
| Average per Farmer | 2010 (29c/L) | 2020 (30% expansion & 20c/L) | 2020 (50% expansion & 20 c/L) | 2020 (30% expansion & 25c/L) | 2020 (50% expansion & 25c/L) | 2020 (30% expansion & 30c/L) | 2020 (50% expansion & 30c/L) |
| Milk Output (litres) | 277,778 | 500,000 | 555,556 | 500,000 | 555,556 | 500,000 | 555,556 |
| Milk Sales (€) | 80,556 | 100,000 | 111,111 | 125,000 | 138,889 | 150,000 | 166,666 |
| Family Farm Income before Interest (€) | 56,667 | 40,231 | 39,629 | 65,231 | 67,629 | 90,231 | 95,185 |
| Annual Interest (€) | 5,194 | 6,346 | 9,615 | 6,346 | 9,615 | 6,346 | 9,615 |
| Family Farm Income (€) | 51,473 | 33,885 | 30,014 | 58,885 | 58,014 | 83,885 | 85,570 |
| Farm Debt (€) | 94,444 | 115,385 | 174,815 | 115,385 | 174,815 | 115,385 | 174,815 |
The main reason for this is due to more volatility on milk prices since the quotas were ended by in April.
When the EU Quotas were originally in place, they ensured that each dairy farmer in the EU got a fair price for his milk, no matter how big or small that contribution was.
Under new conditions though, Irish dairy farmers are now at the mercy of the global market, meaning that they will get either a very bad price per litre for their milk, or they will get a better price than they could have ever imagined.
The figures from the ICMSA also show that dairy farmers could have significantly higher income if the price of milk were to rise by even as much as five cent.
Family farm income a year may be only €33,000 at 20 cent a litre of milk with 30% farmer expansion by 2020. However, if at the same level of expansion a dairy farmer got 30 cent a litre for milk, then the family income could be as much as €84,000.
The latest figures released by the Agriculture and Horticulture Development Board (AHDB) in the UK have shown that for the month of August, the price of milk per litre in Ireland was just 20 pence sterling, an equivalent of 28 cent in Euro.
SOURCE: dairy.ahdb.org.uk
Despite this though, the first seven months of this year have seen milk levels across Irish farms rise by an average of nearly 100 million litres on last year.
This is down to farmers already expanding in the first days after the quotas were ended, and also being able to maximise the efficiency of the herd that they already had.
https://datawrapper.dwcdn.net/1Pzum/1/
Source: Central Statistics Office. [online] http://www.cso.ie/en/releasesandpublications/er/ms/milkstatisticsaugust2015/
The advice however from the Department of Agriculture and other groups is that farmers should think carefully before considering expanding, bearing in mind that they may well endure higher debts.
This is contrary to earlier fears that quota abolition would lead to smaller scale farmers would be pushed out of the market by the larger scale farmers as expansion took hold.
The National Dairy Chairman of the Irish Farmers’ Association, Sean O’Leary, has called for more financial backing from institutions to help with the new climate.
‘Industry stakeholders, banks and government must move urgently to take action individually and collectively to help farmers deal with the new reality of extreme income volatility for the long term’ (Bank of Ireland, 2015).
To conclude then, the advice to the average dairy farmer is to think before you act. If the resources and efficiency is there, then by all means expand. However, if there is any doubt about what might happen if you take a risk, then don’t bother. In this day and age, the risks are much greater in a global market.
APPENDIX
Central Statistics Office (2015). Milk Statistics August 2015. http://www.cso.ie/en/releasesandpublications/er/ms/milkstatisticsaugust2015/
Bank of Ireland (2015) Biggest issue for dairy farmers is cash flow, says IFA dairy chairman. https://corporate.bankofireland.com/news/1698216/biggest-issue-for-dairy-farmers-is-cash-flow-says-ifa
Irish Creamery Milk Suppliers Association (2015) Dairy Sector Finances. www.icmsa.ie