Dairy farmers could suffer €1.3bn financial shock due to milk price collapse
Dairy farmers face a €1.3bn income hit as milk prices fall, with Cork and other major producing counties hardest hit, ICMSA says. Picture: Andy Gibson
Dairy farmers could experience a €1.3bn financial shock through the next 12 months, according to figures released by the Irish Creamery Milk Suppliers Association (ICMSA).
The ICMSA recently released figures illustrating the financial shock dairy farmers could face over the next 12 months as a result of the milk price drop that began in August and continues.
ICMSA president Denis Drennan said about €1.3bn will be wiped out directly in dairy farmer income, with a direct resultant "hit" of almost €3bn as the milk revenue went "out the farm gates" and was multiplied into the wider rural communities.
Mr Drennan said: "Rural Ireland runs on milk. It’s the fuel; it’s the basis for prosperity, not just for the farmer-producers, but for the whole host community as it goes out the farm gates and into the contractors, machinery, services, feed and all the other services and merchants supplying into it.
"The standard multiplier effect is 2.3 and when you apply that to the already sobering figures of €1.3bn, you begin to see the kind of economic hit that a collapse in milk price inflicts on the State as a whole — but very disproportionately on the big milk-producing counties like Cork, Tipperary, Limerick, Kerry, Kilkenny, Laois, and Waterford,” said Mr Drennan.
Mr Drennan said this kind of “income wipeout” was a result of the milk price farmers were receiving being now below the cost of production.
Based on the figures the ICMSA have released, the organisation fears for a county like Cork “that produces near 25% of all the milk in the State”, that farmers could lose €320m in direct dairy farmer income and, when adjusted for the multiplier effect, could lose up to “€750m in economic value as a result of this milk price collapse”,
The ICMSA predicts that over the next 12 months, dairy farmers are estimated to lose €150m in direct farmers' loss and €350m on a multiplier effect basis.
Limerick produces about 8% of Ireland's milk, and would mean a drop in farmers' income of €100m, and a wider drop of €230m to the rural economy. For Kerry, dairy farmers could experience a direct loss of €83m and a wider economic loss of €190m.
“If you go up to the great milk-producing farmers in Cavan, they’ve lost €35.5m in direct milk revenue, and the county’s economy is down €81.5m adjusted for the multiplier effect,” Mr Drennan said.
“Dairy farmers need to plan for their revenues to be either 20% higher or lower than the average. But even that means that you could have a 40% swing in income over two successive years. We’re heading for 35% drop in milk income for this year compared to last. How does anyone plan or budget on the basis of that? It’s impossible,” Mr Drennan said.
The organisation has warned “2026 will be another year where volatility may hit hard”. Mr Drennan cautions the department that time is of the essence and interventions like a voluntary reduction scheme should be implemented to put a "floor" under prices and help the market recover.
“It has to happen — and it has to happen now, or we’ll just see hundreds of millions of euros disappear from dairy farmer income and from the wider rural economies that depend so heavily on our dairy sector”, he added.
