‘Expansion is the one thing that saved dairy farmers this year’

The expansion that occurred in the Irish dairy industry is the one thing that has saved dairy farmers this year, Teagasc’s Laurence Shalloo has said.

The Teagasc Senior Research Officer said that farmers have not experienced the same ‘financial carnage’ this year as 2009 as higher milk receipts have helped to off set lower prices.

The one thing that has really stood to us this year is expansion, because in 2009 average receipts in farm level were €60,000, average receipts this year will probably be closer to €100,000.

“There is an argument out there that expansion is not a good thing in a year like this, but expansion is the one thing that has actually saved dairy farmers in a year like this,” he said.

Speaking at a joint Bank of Ireland and Teagasc Dairy Information Seminar on Thursday, Shalloo said Irish farmers would have been in a poorer position if they still had of been in a quota position when the prices crashed.

He continued to say that Irish farmers have made a significant investment at farm level in terms of increasing stock numbers, while they have also been able to maintain the cost of production of milk.

In 2005, we had about 1m dairy cows and in 2015 we had about 1.239m cows. It will be closer to 1.3 million for 2016.

And, these extra cow numbers are likely to produce 7% more milk this year compared to last year, he said.

Irish farmers maintain the cost of production

Shalloo also said that this increase in production will come at a lower cost, as the cost of producing milk in Ireland has dropped by 9-10% since the ending of quotas, while costs have increased by 2% in the EU.

“We had a huge change in the cost of production in Ireland versus what has happened across Europe, this was mainly driven by an increase in output while costs were held.

“If output increased and costs increased at the same proportion, there would have been no benefit,” he said.

In terms of the cost of producing 1kg of milk solids, Shalloo said that it costs in the region of €2.90/kg in Ireland, while the average cost in Europe was €3.75/kg, which gives Irish producers a distinct advantage.