In a concerning turn of events, the ongoing drop in milk prices throughout 2023 is predicted to strip a staggering €2 billion from the revenues of dairy farmers this year, leading to a ripple effect that could potentially halve the spending capacity within rural communities. The repercussions are anticipated to be profound, not only for dairy farmers themselves but also for the broader rural economy, with ramifications extending well into 2024, as highlighted by Pat McCormack, President of the Irish Creamery Milk Suppliers Association (ICMSA).
This year has borne witness to significant slashes in the prices paid to farmers for their milk, according to McCormack. The resultant decline in the financial prowess of dairy farmers comes as no surprise, casting a shadow over various sectors that rely on their business for sustenance. The effects have been acutely felt by enterprises within rural communities that cater to the dairy industry.
From suppliers of essential farm infrastructure such as concrete and sheds, to milking equipment and farm machinery, an overwhelming trend has emerged—dairy farmers are reigning in their spending. Such a stark shift towards only the most basic purchases is poised to have a resounding impact on the local economy, the ICMSA has cautioned.
The Hard-Hitting Reality by County
The ICMSA has undertaken an in-depth examination across all 26 counties to gauge the extent of revenue reduction faced by dairy farmers over the past two years. The results underscore the alarming plummet in milk values, with an anticipated shortfall of nearly €2 billion in payments to dairy farmers for 2023 when compared to 2022.
Of note, the largest downturn is being observed in County Cork, where the analysis indicates an impending decrease of almost half a billion euros. Similarly, County Tipperary is poised to lose nearly a quarter of a billion euros in direct revenues. These counties, home to significant processors, could potentially witness a pronounced multiplier effect, causing a ripple of job losses that depend indirectly on the dairy sector, the ICMSA has cautioned.
The Broader Impact and the ICMSA’s Call to Action
The monumental magnitude of the loss in rural economic activity is underscored by the ICMSA. Farming communities are well-known for contributing substantively to local businesses and services, thus the extent of this impact is substantial. With a multiplier effect of two for the dairy industry, the deficit could feasibly amount to a staggering €4 billion for the year 2023, the association warns.
The analysis was grounded in an assumed average milk price of 59 cents per liter for 2022, juxtaposed against an expected average price of 37 cents per liter for 2023. Factoring in an estimated 2% year-on-year reduction in production due to prevailing weather and pricing conditions, the findings indicate that nearly 38% of dairy revenues might vanish within just a year. It’s important to note that these calculations don’t encompass the formidable cost pressures faced by dairy farmers, implying that their incomes will suffer considerably in 2023.
While some respite has been offered by a reduction in fertilizer costs, many farmers had already acquired their supplies at inflated prices earlier in the year or during the preceding year. Unfortunately, stubbornly high electricity and feed prices have offset any gains. The severe and substantial drop in milk prices casts a long shadow over dairy farmers’ incomes in 2023.
In response to these dire circumstances, ICMSA’s President McCormack has urgently appealed to Agriculture Minister Charlie McConalogue to convene a meeting of the dairy forum. The aim is to strategize and promptly implement measures to resuscitate milk prices and, by extension, offer a lifeline to the beleaguered dairy industry.
