Some dairy farms could see incomes fall by more than 50 per cent next year because of an expected drop in global milk prices, Teagasc has warned. Its economist Dr Thia Hennessy has also forecast that average incomes across the entire farm sector could be back by up to 25 per cent because of the expected decline in dairy incomes.
The EU milk quota regime will come to an end on March 31st, leaving dairy farmers free to produce as much milk as they wish and the sector is gearing up for a major expansion drive.
Teagasc economist Trevor Donnellan said the drop in milk prices was not unexpected and the farmers knew that volatility in dairy prices was becoming a fact of life. "Average Irish milk prices in 2015 are expected to fall to 27 cent per litre, a reduction of over 10 cent per litre on the average for 2014," he said. This follows several years of very good incomes on dairy farms.
Teagasc economist Dr Thia Hennessy said this had been an excellent year for Irish dairy farmers because of the weather but there had also been a strong increase in milk production globally which created a surplus of dairy products on the international market. Mr Donnellan said the fall in prices was expected to be temporary and the global dairy market was set to begin to recover in the latter half of the year.
They were speaking at the publication of Teagasc’s annual review and outlook for 2015. The review has found that farm incomes fell by just over 2 per cent this year. This was partly attributed to the drop in beef prices which led to IFA protests outside meat factories in recent months.
The Teagasc review found that the price of finished cattle fell by more than 10 per cent this year. Teagasc economist Dr Kevin Hanrahan said incomes for cattle farmers should improve in the coming months. He noted that the UK was our biggest market for beef and said the strong growth in its economy should increase demand for beef.
His colleague Dr Fiona Thorne said cereal prices were expected to rise by about 10 per cent next year but the exceptional yields of this year and 2013 might not be repeated next year. If the trend of increasing yields was reversed next year, she said the average cereal farmer would struggle to make a profit.
Teagasc has also released a study which found that farmers who were members of its beef discussion groups earned higher gross margins that farmers who were not in those groups.
The study by Dr Pat Bogue of Broadmore Research found that beef farmers who were members of the groups kept more animals per acre, had higher output, higher net margin, and got better prices per head for their cattle. Dr Bogue also highlighted the social benefits of being part of a group of like-minded people.
He said the social interaction was a benefit that many farmers did not anticipate when they joined a group but after joining a group, members talked about the benefits of making contact with each other in times of pressure or stress.