Cash surplus for dairy farmers reduced by half

"The milk price this year, across the 27 farms, was 43.1 cents per litre, and the equivalent for the eight months of 2022 was 58 cents per litre," Jim explained.

Cash surplus for dairy farmers reduced by half
Cash surplus for dairy farmers reduced by half

Cash surplus for dairy farmers reduced by half

Some really good dairy farmers were making around €700 extra per cow in the first nine months of 2023. This extra money was used for things like paying the family who works on the farm, paying taxes, and paying off debts. However, this amount is now less than half of what it was last year, dropping from about €1,550 in 2022. Jim Moyles, who advises dairy farmers at Teagasc, talked about this on a recent Dairy Edge podcast.

He looked at the finances of 27 farms from January to September 2023. These farms had different costs and weren’t exactly like the average farm in the country. Jim thought of them as really good farmers, kind of like the top 25–30% when it comes to how well they do things on their farms.

These farmers usually had about 80% of their cows give birth every six weeks, and last year they made around 500 kilograms of milk solids per cow in a year. Their average farm had 156 cows.

They counted how much money they made from milk, selling cows, and all the costs involved in running a dairy farm, but they didn’t include any payments they got from the government. They also didn’t include things like the decrease in the value of equipment or how many cows they started and ended the year with.

Milk Price

Jim compared how much money these farmers made from selling milk in 2022 and 2023.

“The milk price this year, across the 27 farms, was 43.1 cents per litre, and the equivalent for the eight months of 2022 was 58 cents per litre,” Jim explained.

This means they made about 15 cents less for each liter this year, which is a drop of 26%. The situation got even worse after that.

Jim thinks that in the first nine months of 2023, each cow made about €800 less from selling milk compared to the same time in 2022. Last year, each cow made around €2,900 from milk, but this year, it dropped to €2,100 even though they produced a similar amount of milk.

By the end of 2023, Jim thinks each cow will make a bit less milk compared to last year because the weather wasn’t so good and the cows couldn’t be out on the grass as much.

The analysis for the first nine months of 2023 didn’t show much increase in the costs that change depending on different things on the farm, like how much cows eat or the price of food.

Costs

The food costs for each cow went up by about €30 in the first nine months of 2023 compared to last year, even though they fed the cows about the same amount of food, around 0.9 tons per cow.

But the price of the food went down in 2023. Another big cost is the fertilizer they use on the farm, and the cost of that went down in 2023, but farmers who bought it at the start of the year didn’t get the cheaper prices.

Now, the cost of fertilizer for each cow in the first nine months of the year is €75 less compared to 2022, according to Jim. But the small savings here got cancelled because most of the other costs went up a little.

The cost of making the cows healthier and having better babies went up by about €13 for each cow in 2023. This might be because they used different ways to help cows have babies at the right time. Overall, the costs that changed didn’t really go up much, according to Jim.

Fixed Costs

The costs that didn’t change much stayed almost the same in 2023. They went up by about €60 for each cow, said Jim. The cost of hiring people to work on the farm went down a little, from €69 in 2022 to €62 in 2023.

The cost of electricity went up by about €20 for each cow in the first nine months of 2023, reaching €60, compared to the same time in 2022. In 2021, it was only €30 for each cow.

For the first time, they counted how much it cost to rent land for the nine months, and on average, it was €100 for each cow. On some farms, they paid as much as €150 for each cow to rent land.

The third biggest cost, after food and fertilizer, was paying back money they borrowed from the bank. This didn’t change in 2022. It was still about €175 for each cow.

Jim said,

“When you add the variable and fixed cost together, they’re about €1,700 per cow after nine months.”

Even though the average extra money each cow made was €700, it was different for each farm. The most successful farm made an extra €1,300 for each cow after nine months, but the lowest one was losing €17 for each cow.

Good Management

Jim looked at the records of the farmers who made the most extra money from each cow. He found that they didn’t just make good money from selling milk but also from selling cows. They were good at controlling how much money they spent.

They didn’t spend much more on food and fertilizer than others, but they kept the costs that don’t change very low.

They didn’t spend much on renting machines, and they didn’t spend a lot of money renting land or paying back loans. Some of the bigger farms could buy things for less because they bought a lot at once.

Some of the smaller farms want to join together to buy things in a group to save money.

 


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