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2012 Dairy Review Shows Prices Drop 9 per cent

09 January 2013

IRELAND - The impact of a wet summer was exaggerated by low prices as margins suffered due to increased concentrate feed usage, according to the Teagasc Dairy Farming review for 2012 by Trevor Donnellan, Thia Hennessy and Brian Moran.

Dairy milk prices are estimated to have fallen by on average 9 percent from 2011 to 2012. While Irish milk production was 1 percent over quota in 2011/12, production is estimated to have decreased by over 2 percent in the 2012 calendar year, due to poor mid season production conditions.

Feed, fertiliser and fuel prices all increased in 2012, but the most notable impact on costs for dairy systems was a substantial increase in concentrate feed usage. While the impact of the wet summer on purchased feed usage varied considerably by region in Ireland, it is estimated that the volume of concentrate feed increased by 20 percent on average for dairy farms in Ireland.

Preliminary data from the Teagasc National Farm Survey supports anecdotal evidence that the increase in feed use on some dairy farms in 2012 was far higher than the average increase.

Lower farm milk prices coupled with rising input expenditure led to an estimated 40 per cent decline in net margin per litre of milk produced in 2012 relative to the previous year.

The average specialist dairy farm in the Teagasc National Farm Survey tends to also operate a significant beef enterprise on the farm accounting for about 18 percent of gross output. The average dairy farm also received a substantial subsidy payment worth in the order of €22,500 in 2011.

When the estimated changes in inputs, output and subsidies are considered for this average dairy farm, family farm income in 2012 is estimated to have fallen by 27 percent, from an average of €68,600 in 2011 to approximately €50,000 in 2012.

As we enter 2013 supply and demand on international dairy markets are in a better balance than at the outset of 2012. This suggests that the slump in milk prices in 2012 will not reoccur in 2013. Overall, farm milk prices are forecast to average 5 percent higher in 2013 than in 2012.

It is anticipated that the main change in input expenditure on dairy farms in 2013 will be a reduction in feed use to more normal levels once spring arrives. Little change in energy expenditure is expected. Fertiliser expenditure on dairy farms may rise in 2013, reflecting increased usage, since application rates seem to have been below normal in 2012.

Overall, dairy margins are forecast to increase by 31 per cent in 2013 relative to 2012. When the mix of enterprises on the average dairy farm is considered, average family farm income for 2013 is forecast to increase by 20 per cent.

Further Reading

You can view the full report about Irish agriculture clicking here.

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