Dairy farm incomes likely to drop by 50% in 2018 – Teagasc

It is likely that dairy farm incomes in 2018 will typically be only half of what was achieved in 2017, according to a new report produced by Teagasc economists.

The extent of the decrease will depend on grass growing conditions over the rest of the season, the report added.

While dairy farmers are set to experience the largest income reductions, farm incomes are expected to be “down substantially” across all the main farm systems this year – with increases in feed, fertiliser and fuel prices all playing a role.

Things could get even worse however, as the average-sized Irish dairy farm could see net margin decrease by up to 60% in 2018.

In a statement, Teagasc said: “Drystock farmers – while not as badly affected as dairy farmers – will also experience an income reduction due principally to higher feed expenditure, with cattle and sheep prices for 2018 unlikely to be dramatically different relative to the 2017 level.

“In spite of an expected increase in cereal prices, coupled with a substantial straw price increase this year, a steep reduction in cereal yields and associated reduction in straw yields will mean that tillage farm incomes in 2018 will be down and could return to the low levels experienced in 2016.

“For tillage farms, the full extent of the financial impact this year will depend on weather conditions at harvest time.

For dairy and drystock farms the financial impact will depend on how quickly normal grass growth is restored and the window of opportunity this creates for further silage production over the next three months, before winter conditions set in.

Weather conditions

The report was produced as part of Teagasc’s mid-year outlook; it outlined how Irish grassland and tillage farmers have faced “highly unusual weather” through the first half of 2018.

Farmers have had to endure a long winter, an abnormal spring rainfall pattern, heavy snow, freezing temperatures and – most recently – a drought in recent months.

Continuing, Teagasc stated: “The initial impact of these weather anomalies was felt via elevated levels of winter feeding of cattle and late planting of spring-sown tillage crops.

This was then followed by high levels of spring rainfall, which resulted in cattle being removed from pasture and re-housed for a period. By the middle of summer, drought conditions led to a collapse in grass growth, limited grazing and an interruption to silage production.

“The extent of the problem on dairy and beef farms has led to a run-down of existing stocks of silage intended for the coming winter and the diversion of silage land into grazing.

“Tillage farmers have found that spring-sown crops have failed to mature properly, which will have a major impact on harvest yields.

“Meanwhile, cattle finishers have also been forced to increase feed use and take actions to finish cattle early – with suckler farmers also experiencing higher feed demand,” it said.

Feed bills ‘double’ for dairy farmers

The report also found that dairy farmers – who tend to operate at a higher stocking rate than drystock farmers – have been badly affected.

Many dairy farmers are finding that their feed bills have doubled due to the limited availability of grass and fodder, the Teagasc report explained.

Because of this, some dairy farmers are “contemplating herd size reductions as a means to limit their feed bills”.

Teagasc economists noted that farm milk prices were back in the first half of this year and are likely to be back by about 10% on last year’s levels.

Nationally, milk production – which had been set to continue to increase in 2018 – is now likely to contract slightly, relative to the 2017 level, the report stated.