Average dairy income jumps 30% to €130,000.
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With average income up 30%, it's been a remarkable year for Ireland's dairy farmers
Gas scarcity and energy prices are major concerns for the EU dairy industry, especially for drying and milk processing.

It has been a remarkable year for Irish dairy farmers, with their summer milk price rising from ninth best in the EU to third best.

This will take the average dairy farm income figure to over €130,000, predicts Teagasc in its annual Situation and Outlook for Irish Agriculture report.

Figures from the EU Commission’s Milk Market Observatory compare July 2021 and July 2022 milk prices, and show an annual farm gate milk price rise of 55% in Ireland, exceeded only by a 76% rise in Lithuania, 63% in Latvia, 60% in the Netherlands, and 58% in Belgium.

In contrast, price rises were much lower in some major dairy countries, such as 18% in the year to July in France, 30% in Italy, 32% in Austria. The average EU price rise to farmers for milk was 42%.

Teagasc economists said Irish dairy farmers have benefitted from a dramatic increase in milk prices, due to the lack of growth in global milk supplies.

Irish milk prices in 2022 are likely to average 40% higher than in 2021. However, milk production costs are likely to be about 10c per litre higher in 2022.

The result predicted by Teagasc is a significant increase in income in 2022 on dairy farms, of 30% or more, compared to 2021.

However, fixed milk price contracts, paying well below the spot milk price, will reduce incomes on some farms, especially where a high proportion of the milk produced has been sold at the fixed price.

For the first time since milk quota abolition in 2015, no increase in Irish milk production is forecast this year (unless there is a late season supply surge). According to Teagasc, dairy farmers have adopted a cautious approach to further expansion, given the large increase in input costs. For example, feed prices are about 25% higher than in 2021.

Unusually dry summer and autumn weather also had an impact on Irish milk production. It is likely to affect dairy incomes particularly in the South and East. which had the lowest summer rainfall, reducing grass availability.

Across the EU, the gross profit margin on dairy farms is estimated to have increased 42% in the first three months, and 57% in the second quarter, compared to 2021. Teagasc has estimated the average Irish dairy farm should see a net margin per hectare of over 22c per litre thus year, an increase of 60% compared to 2021.

The European Commission expects dairy prices to remain high in the coming months, with milk collection rather weak despite very high prices.

However, gas scarcity and energy prices are major concerns for the EU dairy industry, especially for drying and milk processing. Also, environmental constraints, animal welfare standards, and shortage of labour are causing problems in certain member states.

The European Dairy Association, representing milk processors, also warns of uncertainty around availability of natural gas for milk processing, energy prices, sharply increasing input costs, and consumer reactions to high inflation.

It says an overall drop in EU exports is expected (notably for skim and whole milk powders), but domestic use of all dairy products may remain stable.

Eucolait, the European Association of Dairy Trade, said the full effects of inflationary pressures are yet to materialise, but significant corrections to dairy prices are not expected in the short term, unless there is a strong recovery of supply.

The European Commission said EU average farm gate milk prices have been increasing for the last 19 months, and in July were 47% above the five-year average.

Feed costs for dairy production in the EU (based on a mix of cereals, rapeseed meal and soybean meal) have increased by some 80%, compared to 2020.

Overall, milk collection in the main exporting regions of the world decreased by 0.9% in the first seven months of 2022. But global milk production may return to growth before the end of the year.

Global demand for dairy has remained reasonably solid, but combined trade flows are lower than last year, due to lower demand from China. Reduced imports by China were partially offset by dynamic buying from other main importers such as Mexico, Southeast Asia, and Algeria.

The EU and New Zealand lost some export shares so far in 2022, but still accounted for 55% of world export volumes and, together with the USA, 78%. The USA increased export shares from 21% to 23%.

The UK, China, Indonesia, the USA, and Japan were the top five EU export destinations so far in 2022, with a 40% share.

Dairy farmers still reeling from floods have been given a helping hand, with the state and federal governments locking in funding for key projects to prepare for the next disaster.

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