'Don't use higher milk prices as justification for high borrowings'
Irish dairy farmers should not chase increased production driven by higher costs, dairy expert Michael Murphy has warned.
This approach left thousands of farmers across Europe, North America and New Zealand struggling with unsustainable debt levels during the recent downturn in milk prices, he said.
The Cork-based dairy analyst, who has significant farming interests in New Zealand and the Americas, urged farmers to keep a firm grip on costs despite the recent lift in milk prices.
“Many New Zealand farmers really chased high milk production and moved away from their low-cost systems,” Mr Murphy explained.
He said expensive land was the main driver of higher costs on New Zealand holdings, which had increased to around €5,500/cow on average.
“The top 10pc of farmers [in New Zealand] did not go down that road, but the majority did, and they’re having a horrid time as a result,” he said.
High borrowings were also a feature of the Danish and Dutch dairy sectors, Murphy pointed out. Average debt levels in Denmark are around €20,000/cow, while Dutch holdings are carrying about €10,000/cow.