Almost one quarter (24%) of dairy farmers have not checked how the new nitrates banding rules will affect them, according to the Ifac Irish Farm Report 2023.
The report, which has been published today (Thursday, February 16), also reveals that 23% of farmers surveyed require additional land, while more than one fifth (22%) intend to reduce their land.
Despite concerns about environmental and inflationary pressure, four out of every five (80%) dairy farmers surveyed have a positive outlook for the sector.
The Ifac research was carried out from October 2022 to December 2022.
Challenges for dairy farmers
The top three challenges for dairy farmers according to the Ifac Irish Farm Report 2023 are as follows:
- Regulatory changes (71%);
- Rising input costs (68%);
- Increased workload and labour shortages (26%).
According to the report, input costs rose substantially in 2022, up by around 12c/L across the dairy sector.
Farmers who had sourced 2022 supplies at 2021 prices were somewhat shielded from the impact, but, on average, feed was around 40% higher, while fertiliser traded at 250% on 2021 levels.
Ifac has said that these prices are expected to harden into 2023, driven by escalating energy costs.
The advice is that in the current environment, it is important to shop around and consider locking in if you are able to negotiate a good deal. This will help to minimise risk.
Cashflow management also requires close attention with a sharp focus on maintaining sufficient reserves to cope with volatile milk prices, according to Ifac.
The report states: “In the current environment, it is more important than ever to understand your own production cost and where your breakeven price is.
“When calculating your breakeven remember to include your capital loan repayments, drawings (directors payments) and tax. This will allow you calculate what your business’ entire cash costs (before any capex) are for the farm to run cash neutral.”
Ifac said that, ideally, a farm business should be returning a cash surplus that can be either banked or reinvested back into the business.
Climate
2022 saw the introduction of sectoral carbon emission reduction targets covering the period up to 2030. Taking 2018 as the base year, agriculture is required to cut emissions by 25%.
Meanwhile, a Nitrates Action Plan (NAP), with a view to improving water is currently underway.
The Ifac report states that a new fertiliser register will make it more important than ever to understand where, how and why farmers are using chemical fertilisers.
The new NAP which came into effect from January 2023 will increase the deemed organic nitrates produced per cow based on milk yield and will move about 17% of herds from 89kg of organic nitrogen excretion per cow to the next band at 106kg per cow, forcing some dairy farmers to involuntarily reduce their stocking rate.
A mid-term review of the NAP could also see the possibility of reducing the maximum of 250kg of organic N/ha to 220kg depending on water quality review.
It added that greater use of multi-species swards can play a role in helping to reduce reliance on chemical fertiliser.
Period Description Organic N/cow 2022 Current organic N figure 89 2023 Low yielding (<4,500kg) 80 2023 Average yielding (4,500-6,500kg) 92 2023 High yielding (>6,500kg) 106
New nitrates banding regulations based on milk yield are also being introduced. These could see an increase from 89kg N/cow to 106kg N/cow on higher-stocked farms.