Standing Still is Not An Option, Dairy Farmers Warned

21st November, 2002

A Teagasc economist has warned that changes in EU and world trade policy will lead to continuing income pressure in dairy farming.

Addressing the Teagasc National Dairy Conference in Killarney, economist Trevor Donnellan said that farmers who are committed to continuing in dairying must grow their business and adopt the most effective cost cutting methods.

"Under current quota policy, the limited amount of quota becoming available will not allow sufficient expansion in milk production to maintain income. Therefore huge emphasis must be placed on cost-efficiency".

"Many farmers have too many cows. This is leading to production inefficiencies. Currently average milk output per cow is around 4,100 litres (900 gallons). This should be boosted to over 5,000 litres (1,100 gallons) leading to a reduction in cow numbers" he advised.

Teagasc dairy specialist, Tom O'Dwyer, told the conference that the difference in cost between the lowest and highest cost milk producers is 8c/litre, (almost 30p/gallon). This amounts to a massive €15,000 per year in lost income on many dairy farms.

Mr O'Dwyer said that the structure of the Irish dairy industry has changed radically during the past two decades.

"The number of dairy farmers has dropped from 63,000 in 1983 to 26,000 today, a drop of over 4% per year. This decline is set to continue. In 2001, almost 1,200 farmers ceased milk production," he said.

He said the average dairy herd is now 47 cows, producing 188,000 litres (42,000 gallons) per year. However, in order to maintain income, the majority of dairy farmers with milk output at and above the average would need to substantially increase output over the next six years.

"A typical dairy farmer with output of 230,000 litres (50,000 gallons) at present is making an income of around €42,000. This farmer would need to increase output by 15% (30,000 litres) by 2008 in order to secure an additional €12,000 in income. This is the equivalent of an annual income rise of 4%," he said.

Tom O'Dwyer said farmers must aim to retain up to 60% of their gross output value as profit. This compares with an average figure of 43% of output retained as profit in 2001. Because of lower milk prices, only 36% of output is expected to be retained as profit this year.

The complete proceedings from the National Dairy Conference are now available. Click here.