The production cost of a litre of milk on an Irish dairy farm has risen by 11.24c, according to Karol Kissane, senior policy executive with the Irish Farmers’ Association (IFA).
Kissane was speaking at the IFA’s milk price analysis webinar, which took place this week, where he outlined that, in the last number of months, input costs on farms have skyrocketed.
Milk-production cost
Farmers have experienced a 230% increase in fertiliser costs, an 80% increase in diesel, and a 50% increase in electricity costs, he told webinar attendees.
These price hikes, he said, can be tied back to the increased cost of gas.
“If we look at our milk processors and the drying of milk, there is so much now driven by gas that any increase really comes home to roost to us at farm level,” he said.
Looking at the price of gas in Europe, Kissane highlighted an increase in cost of 580% in the last year.
“Oil has experienced a 70% increase in the same period, which doesn’t look as bad as gas – but we are all well aware [of it] when we go to the pumps.
“These increases are driving all our inputs up, because there is gas and oil in just about everything,” he said.
Herd analysis
Kissane completed an analysis of a typical Irish dairy farm and how increased input costs will affect the farm in 2022.
He based his analysis on spring-calving, 89-cow herd suppling 500,000L of milk. This farm spreads 35t of chemical fertiliser, feeds 100t of concentrates, harvests 100ac of silage, and uses 4,500L of diesel.
Price 2021 Price 2022 Total increase Increase cent/L Total increase percentage Fertiliser (35t) 300 990 €24,150 4.83 230% Concentrates (100t) 326 425 €9,879 1.98 30% Fuel (4,500L) 3,375 6,075 €2,700 0.54 80% Silage (100ac) 130 200 €7,150 1.43 48% Electricity 8,285 11,184 €4,142 0.83 50% Other 87,458 96,204 €8,746 1.75 10% Added cost €56,192 11.24
“The total increase for this farm was 11.24c/L, on every litre of milk produced, or €56,192,” Kissane explained.
“Last year, the average base price, based on the Central Statistics Office (CSO) figure was 36.7c/L, so you can do the maths to determine what the base price needs to be to maintain your margin.”
“Average base price is currently 43.5c/L, which looks like a great price. But when you add in the jump in input costs, we really need to keep an eye on the milk price we are getting,” he said.