This year has been amazing for Irish dairy farmers, whose summer milk price went from being the ninth best in the EU to being the third best.
Teagasc says in its annual report on the Situation and Outlook for Irish Agriculture that this will bring the average income of a dairy farm to more than €130,000.
Comparing milk prices in July 2021 and July 2022, the EU Commission’s Milk Market Observatory found that milk prices at the farm gate rose by 55% every year in Ireland. Only Lithuania, Latvia, the Netherlands, and Belgium saw bigger increases: 76%, 63%, 60%, and 58%, respectively.
On the other hand, prices went up much less in some major dairy countries. For example, in the year leading up to July, prices went up only 18% in France, 30% in Italy, and 32% in Austria. The average increase in milk prices for farmers in the EU was 42%.
Due to the lack of growth in global milk supplies, economists at Teagasc said that milk prices have gone up a lot, which has helped Irish dairy farmers.
The average price of milk in Ireland in 2022 is likely to be 40% higher than in 2021. But the cost of making milk is likely to go up by about 10 cents per litre by 2022.
Teagasc says that the result will be that dairy farms will make at least 30% more money in 2022 than they did in 2021.
But fixed milk price contracts that pay much less than the spot milk price will hurt some farms’ incomes, especially if a lot of the milk they make has already been sold at the fixed price.
This year, Irish milk production isn’t expected to grow for the first time since milk quotas were taken away in 2015. (unless there is a late season supply surge). Teagasc says that dairy farmers are being careful about further growth because input costs have gone up so much. For example, the cost of feed is about 25% more than it was in 2021.
Irish milk production was also affected by a summer and fall that were very dry. It could hurt dairy farmers’ incomes, especially in the South and East. which had the least rain in the summer, making grass less available.
The gross profit margin on dairy farms in the EU is thought to have gone up 42% in the first three months and 57% in the second quarter compared to the same time last year. Teagasc says that the average Irish dairy farm should have a net margin per hectare of more than 22 cents per litre this year. This is a 60% increase from 2021.
The European Commission thinks that milk prices will stay high over the next few months, even though prices are very high.
But the EU dairy industry is very worried about the lack of gas and the high cost of energy, especially when it comes to drying and processing milk. Some member states are also having trouble because of environmental issues, animal welfare standards, and a lack of workers.
The European Dairy Association, which represents milk processors, also warns of uncertainty about the availability of natural gas for milk processing, energy prices, sharply rising input costs, and how consumers will react to high inflation.
It says that EU exports are likely to go down overall, especially for skim and whole milk powders, but that the use of all dairy products in the EU may stay the same.
The European Association of Dairy Trade (Eucolait) said that inflationary pressures haven’t shown their full effects yet, but that dairy prices aren’t likely to change much in the near future unless there is a strong recovery of supply.
The European Commission said that the average farm gate prices for milk in the EU have been going up for the last 19 months and were 47% higher in July than the average for the last five years.
Compared to 2020, the cost of feeding dairy cows in the EU with a mix of cereals, rapeseed meal, and soy meal has gone up by about 80%.
In the first seven months of 2022, the amount of milk collected in the world’s main exporting regions fell by 0.9%. But the amount of milk made around the world may start to grow again before the end of the year.
The world’s demand for dairy has stayed pretty steady, but overall trade flows are lower than last year because China’s demand has dropped. China bought more from other major importers like Mexico, Southeast Asia, and Algeria to make up for the fact that it imported less.
So far in 2022, the EU and New Zealand have lost some of their export shares. However, together with the USA, they still make up 55% of the world’s export volumes. The United States’ share of exports went up from 21% to 23%.
So far in 2022, the top five places where EU exports went were the UK, China, Indonesia, the USA, and Japan. Together, they made up 40% of all EU exports.
