In this article, Mr. Pat McCormack, President of ICMSA, sheds light on milk price reductions, which his organisation estimates, will wipe billions from dairy farmers’ revenues this year.
The milk price reductions so far in 2023 will wipe €2 billion from dairy farmers’ revenues in 2023.
In turn, this has reduced spending in rural communities by possibly double that amount and this is going to have a very serious impact not only on the dairy farmers themselves, but on the wider rural economy in 2023 and well into 2024.
Severe cuts
2023 has seen very severe cuts to milk price throughout the course of the year and it comes as no surprise to see the spending power of dairy farmers dramatically deteriorate.
This is being reported by businesses across rural communities that provide goods and services to dairy farmers and the wider dairy industry.
From concrete to shed suppliers, to milking equipment to farm machinery, the reports coming back are that dairy farmers have stopped buying and investing.
Only the very basics are being purchased and this is going to have a dramatic impact on the local economy.
ICMSA has carried out a detailed analysis of each of the 26 counties to establish the reduction in revenues earned by dairy farmers over the last two years.
Results show the dramatic drops in milk values with almost €2 billion less expected to be paid to dairy farmers in 2023 versus 2022.
This is an astounding amount to lose from the rural economy as we all know that farmers spend in their local communities and many local services and companies are dependent on farmers.
With an output multiplier of two for dairy, the total deficit from the Irish rural economy could be €4 billion for 2023.
59c/L
The analysis used an average milk price of 59cpl for 2022 and an expected average price of 37cpl for 2023 with production expected to fall by 2% year on year given the weather and price conditions prevailing at present.
This means that almost 38% of dairy revenues have been wiped away in the space of 12 months and this analysis does not include the very severe cost elements facing dairy farmers, meaning that dairy farm incomes will be severely hit in 2023.
While fertiliser has reduced somewhat, most fertiliser was purchased early in the year or last year at inflated prices and unfortunately, electricity and feed remain stubbornly high.
At county level, we see the largest reduction occurring in Cork with almost half a billion of a reduction while Tipperary will lose almost a quarter of a billion in direct revenues.
These counties have large processors, and this is where the multiplier effect can bite even harder with so many indirect jobs depending on the dairy sector.
Milk price reductions have been very severe and will have a massive impact on dairy farmer income in 2023.
I am calling on the Minister for Agriculture, Food & Marine to immediately convene a meeting of the Dairy Forum.
We need a clear strategy to be put in place to kickstart an immediate recovery in milk price which is needed by the farmers who produce the milk on a daily basis but also the wider rural businesses that are dependent on it for their revenues.
