Teagasc is forecasting a “substantial” drop in dairy farm income in 2023, with a decrease of more than 50% on the 2022 level “now possible”, according to a new report released on Tuesday, July 25th, 2023.
This decrease would bring the average dairy farm income back to €70,000.
For the second year in succession, no increase in aggregate Irish milk production is forecast.
While dairy cow numbers have increased marginally in 2023, this has been offset by slightly lower milk yields, the publication outlines.
Weather conditions have been unfavourable at times this year, and this is evident in grass growth figures, which are below the long-term average, the report notes.
Irish dairy farmers benefitted from a dramatic increase in milk prices in 2022, but there has been a sharp reduction in milk prices in 2023, as the global milk supply has increased.
Average milk production costs in 2023 are likely to remain close to the 36c/L average figure recorded in 2022, leaving higher-cost producers, in particular, with very low margins.
The report, by economists at Teagasc, provides an update on the forecast average margins and incomes which are likely across the agricultural sector in Ireland in 2023.
All income calculations are in nominal terms, according to the authors, which means that they do not factor in general inflation and the impact that this has on the purchasing power of incomes earned in agriculture.
While the rate of general inflation has fallen in Ireland in 2023, it remains well above the ECB target level of 2%.
While many farms, particularly dairy and tillage farms, will experience a decline in nominal income in 2023, even farms with stable nominal incomes in 2023 could still experience a decline in real income if consumer price inflation remains ahead of nominal income growth rates.
In December a further assessment of farm incomes for 2023, along with income forecasts for 2024, will be produced by Teagasc economists.
While over half the year has passed, making accurate income forecasts across the various farm systems for 2023 remains challenging.
Some critical data relating to trends in the volume of input usage and changes in the price of some farm inputs are not readily available at this time.