Dairy focused on input costs
This year, our dairy farmers will have to hang on in there, while more expensively produced mik round the world dries up, because falling prices make production unsustainable.
Every farmer around the world can make money on milk if they are paid in the mid-to-high 30-40 cent per litre range which farmers here enjoyed in 2013 and 2014.
With the marginal cost of production here averaging 26 cent per litre on many farms, there has been much leeway for profit.
However, the kind of global dairy market strength which generates such milk prices is not sustainable, because high prices drive milk supply around the world to excessive levels and constrain demand growth by making dairy products unaffordable for more and more consumers.
The prices are on the way down now, with the Irish Dairy Board last week agreeing with most experts that the 2015 milk price in Ireland could average 26-28 cent per litre, including VAT.
As price falls, so do dairy farmers, and it is no surprise this is happening first in China, where the marginal cost of producing milk is estimated at 45-50 cent per litre. Already, Chinese processors have turned to imported commodities, leaving some of their recent dairy farm start-ups feeding milk to pigs.
Even in Europe, farmers in the continental countries say they need a milk price level in the forties to be profitable.
Irish dairy farmers have been doing much better than that, and figures released last week revealed they have also kept their borrowings relatively low, as well as keeping their milk production costs low.
Against this background, it is good news that agricultural input prices in November 2014 were 3.5% lower than 12 months previously, according to the Central Statistics Office.
It is good also that both the Government and the EU have warned suppliers of farm inputs that they are watching them to ensure they pass savings back to farmers, from the fall in fuel prices, for example.
Agriculture Minister Simon Coveney has called on the fuel supply sector to ensure the maximum possible benefits of the falling prices is passed on to the farming sector and all consumers.
EU Agriculture Commissioner Phil Hogan has drawn attention particularly to fertiliser prices and demanded to know why they are trending upwards despite falling energy prices.
Ireland has to export dairy product from nine out of every ten litres we produceand has to carry higher logistical exporting costs than continental EU competitors.
With such obstacles built in, there is no room at all for added costs here at home due to uncompetitive practices in the farm input business.
