The cost of production of dairy farms is significantly higher than previous years, with the increased cost of inputs the main reason behind this.
During the recent winter milk week, it was outlined to farmers that the cost of keeping a winter-milk cow was much higher this lactation.
The cost of keeping a winter-milk cow has gone from €1,934 in 2021, to €2,682 in 2022 – a €748 increase.
Almost half of this cost was associated with the increased cost of feed.
Cost of production
During the Teagasc National Dairy Conference the average cost of keeping a spring-calving cow was outlined.
Based on data collected from the Teagasc E Profit Monitor system, the average cost of keeping a cow in 2021 for a spring-calving dairy farmer was €1,656/cow (ranging from €1,198/cow to €2,211/cow).
This figure includes the cost of keeping the cow and also her replacement heifer costs.
To determine the projected cost of keeping a cow in 2022 a number of input cost assumptions were made:
- Same quantity of inputs as 2021;
- Average meal price of €415/t in 2022;
- Fertilizer cost increase by 250%;
- Contractor cost increase by 50%;
- Total variable costs on average increase by 49%;
- 10% increase in fixed costs.
Using these assumptions, it was determined that the cost of keeping a spring-calving cow in 2022 had risen from €1,656/cow to €2,218/cow – a €562 increase.
This is equivalent to a 33% increase in the cost of production which will equate to an average cost of 37.84c/L for 2022.
It is important to note these estimates do not include owned land and labour costs.
The average gross output on Teagasc E-Profit Monitors over the last five years (2017-2021) has been 40.88c/L.
According to Teagasc: “It is clear, therefore, that the final margins achieved on dairy farms in 2022 will have been almost entirely dependent on the higher milk price returned.”
Cost of keeping a cow in 2023
Looking forward to 2023, Teagasc is expecting that there will be further increases in concentrate costs while other costs will likely increase at an inflation rate of 8%.
This, according to Teagasc, will result in a total cost/cow increase to €2,331.
The increasing cost of production on dairy farms, according to Teagasc, means that dairy farmers need to maintain close control on costs despite a seemingly high milk price.
They are advising farmers to prioritise investment in high return areas such as soil fertility, and to stress-test capital expenditure projects against possible changes to base milk price.