28 November 2023
Following a challenging year, when the dairy sector experienced a sharp decline in the value of output, combined with costs remaining very high, Teagasc economists have estimated that the national average net margin on dairy farms will be €859/ha in 2023 – a decline of approximately 71% on 2022.
Published by the Teagasc Agricultural Economics and Farm Surveys Department, the Teagasc Outlook 2024, Economic Prospects for Agriculture publication suggests that this will occur on the back of a reduction in milk prices and production per hectare being slightly down in 2023.
The authors note that a strong decline in milk prices, in a high cost environment, resulted in an estimated net margin of 7.05c/L in 2023 – representing a 71% decrease on 2022.
A review of dairy in 2023 – the key points:
- Global milk production increased in 2023, following a decline in 2022. International import demand for dairy products was muted;
- Butter and skimmed milk powder prices in particular fell sharply and given their importance in the Irish dairy product mix, Irish milk prices fell well below the EU average in 2023;
- The annual average Irish milk price for 2023 is estimated to have declined by 28% to 43.2c/L (actual constituents vat incl) from a record high level in 2022;
- In aggregate, Irish milk production declined slightly in 2023 (down 1%), with generally favourable grass growth observed through some of the peak milk production months, despite particularly dry conditions early in the summer;
- Dairy cow numbers increased by 1.2% to 1.647m in June 2023, compared to June 2022;
- On a per cow basis, dairy feed usage is estimated to have increased by 3% in 2022 to about 1,283kg;
- Due to an increase in concentrate feed prices and usage, feed expenditure increased in 2023 by 5 and 7% on a per hectare and per litre basis respectively relative to June 2022;
- Fertiliser prices fell somewhat in 2023, but remained high. Fertiliser usage continued to decline. As a result, pasture and forage costs fell on average by about 11% year-on-year;
- Despite reductions in some input cost items in 2023, it is estimated that total production costs did not come down relative to 2022. Total costs in 2023 are estimated to be approximately 37.1c/L.
Dairy outlook
The dairy market outlook for 2024 is more positive, the authors of the publication note, with further adjustments in supply and demand expected to bring some improvement in international dairy commodity prices. However, weak global economic growth may hinder a stronger dairy market recovery. Overall, it is estimated that average net margin per hectare will recover to €1,477/ha in 2024.
Outlook for dairy in 2024 – the key points
- The annual average Irish milk price in 2024 is forecast to improve by approximately 10%. This would represent an annual average milk price of approximately 47.5c/L (actual fat and protein VAT inclusive);
- Some further easing in production costs is expected across some cost items e.g. fertiliser and fuel;
- Assuming normal weather conditions in 2024, feed use per head on Irish dairy farms is expected to remain stable. Feed prices are also expected to remain relatively unchanged (down 1%);
- Despite global uncertainty, oil prices are expected to fall further in 2024, with fuel prices forecast to decrease by 4%, on average;
- The outworking of the recent changes in nitrate regulations is likely to be complex and have some influence on national production. No increase in milk production is assumed in this forecast for 2024, with a stable dairy cow population and stable milk yields;
- With output value per hectare expected to increase by 10% in 2024, and allowing for a slight fall in costs, improved margins are anticipated. The forecast average net margin per hectare in 2024 is €1,477, an increase of 73% relative to the low returns of 2023;
- On a per litre basis, the average net margin is forecast to increase by 73% in 2024 relative to the 2023 level, to an average of 12.2c/L;
- Overall, a return to more normal income levels is envisaged on Irish dairy farms in 2024. Although production costs look set to remain elevated, an improvement in farm milk prices will boost output value.
For more detail on the above, access the Outlook 2024 – Economic Prospects for Agriculture publication here.
