Farm Ireland

Tuesday 23 January 2018

Budget for 28c/l milk price until 2020: Teagasc

John Donworth, Teagasc
John Donworth, Teagasc
Louise Hogan

Louise Hogan

Dairy farmers are being urged to budget for a milk price of 28c/l over the next five years.

And Teagasc expert John Donworth says the expectations are that the milk price for 2016 will mirror the low milk price of 2009, hovering at around 23 or 24c/l.

"In 2009 it turned around quickly but I don't expect any turnaround until next year," said the Teagasc regional manager for Kerry and Limerick.

Teagasc is advising farmers to budget for 28c/l over the next five years in the hopes that the price trough this year would be offset by future rises.

However, he warned there were stark differences in earnings between the top third and the average producer.

"There is a gap in the milk price of around 3c/l between those who are doing things right and the average co-op supplier. That works out at around €150 a cow - which is enough for a decent repayment," he said.

Cork-based agricultural consultant Mike Brady said his company was working off a price of 26c/l for 2016 and an average 30c/l base price for the following four years.

"You'd nearly need a PhD to work out the milk price at the moment as there are so many different co-ops, winter milk prices and fixed price schemes," he said. "It is the human bit that is important - can a farmer take the heat if the pressure comes on."

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Credit crunch

Mr Brady said he had expected a credit crunch this spring but the milk price did not slump as much as expected.

He added that major cashflow difficulties may not emerge until early 2017, following 12 months of low prices.

This sentiment was echoed by the banks, as AIB's Pat O'Meara said they were reviewing the short-term price but were working off a 30c/l base price over the five years. "We are not seeing as much requests for support as we would have expected," said Mr O'Meara.

However, he said with lower prices farmers may not be able to build up a "buffer zone" for year end and early 2017.

Bank of Ireland's Sean Farrell said they were working off an estimated average milk price of 30c/l and they feel the price will recover but it will be very late this year.

He said they haven't seen signs of serious difficulties yet but farmers may feel pressure when the March milk cheque lands in April with low solids.

Mr Farrell urged farmers to contact them if they think they are going to have financial difficulties in advance and there were options such as overdrafts, stocking loans or changes to repayments.

Mr Brady urged farmers not to cut back on the essentials such as fertiliser and proper feeding of cows.

Talk of cutting back on vaccinations to save costs was "reckless", he added.

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