Dairy farmers' incomes shrank by 26pc in 2018

Average earnings down by €24,600 as new figures reveal full impact of drought and lower milk prices

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Declan O'Brien and Martin Ryan

Dairy farmers' incomes dropped by almost €25,000 on the average 100-cow herd last year due to lower milk prices and increased feed costs during last summer's drought.

Net margins per cow were back 26pc, falling by €246 per cow from €941/cow in 2017 to €695/cow in 2018, according to new figures from Teagasc.

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Overall, net margins nationally fell by €345m from €1.32bn in 2017 to €975m in 2018.

The net margin per litre of milk produced fell from 16.93c in 2017 to 12.17c last year, while the margin per hectare fell from €2,168 to €1,590.

The Teagasc Profit Monitor data is based on returns from 1,331 herds in 2018, and 1,568 in 2017.

The figures show that the average milk price last year fell by 1.45c/l, dropping to 36.68c/l compared to 38.13c/l in 2017. In terms of milk solids, returns dropped from €4.78/kg to €4.57/kg.

Although the average output per cow was up last year by 151 litres to 5,712 litres, variable costs were also significantly higher, increasing by almost 3c/l to 14.95c/l.

Teagasc dairy advisor Joe Kelleher said the lift in milk output and the rise in variable costs both reflected the increased usage of compound feeds last summer in dairy herds across the south and east as a result of the collapse in grass growth during the drought.

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Feed accounted for the bulk of the increase in variable costs. It equated to 7.16c/l in 2018, compared to 4.46c/l in 2017 - a 60pc hike.

Compound feed usage doubled last year, typically jumping from around 0.75t per cow to almost 1.5t per cow.

Mr Kelleher said that while farmers had to give compound feed rations to cows last summer because of the shortage of grass and fodder, the Profit Monitor figures showed once again that milking cows off grass is the most profitable way of driving incomes on dairy farms. The value of additional milk produced per cow in 2018 was €64, but the extra feed costs per cow were €161.

Earnings gap

With grass growth exceeding 50kg/ha/day across much of the country this week, Mr Kelleher said the focus for dairy farmers should be on maximising their usage of grass, and feeding just enough ration to cover cows' cal-mag requirements.

Meanwhile, the data confirms a massive gap in earnings between the top 25pc and the rest of dairy farmers completing the Profit Monitors.

The top performers made €920/ha more than the average Profit-Monitor dairy farmer in 2018 - €2,509/ha compared to €1,590/ha.

This was achieved by producing an additional 395 litres per cow over the average, which increased their net margin per litre by 4c, and their net margin per cow by €297.

Staying with dairying, ICMSA's Ger Quain has dismissed Brexit uncertainty as a reason for further milk price cuts. "It's very noticeable that the West Cork Co-ops - who by virtue of their Cheddar production are probably the most exposed to Brexit - are still paying the best milk price in the country," he said.

"There is no justification that would explain a price cut for April supplies. Co-ops and processors must stop looking for an excuse to reduce milk prices and look at the underlying stability the data points to right now."

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