Michael Brady.
Agricultural Consultant and managing director at Brady Group: Agricultural Consultants & Land Agents. The Lodge, Lee Road, Cork.
It is said that after a good year in dairy farming, it takes two years to recover!
2022 was the best year on record for dairy profitability, 2023 was a difficult year from both a financial and a weather perspective and 2024 was a recovery year.
What will 2025 bring?
This is the time of year were dairy farmers take stock and plan the year ahead. The smart ones do a farm business plan which is a physical and financial budget for the year ahead. The business plan projects the amount of surplus cash that may be available for spending on-farm or off-farm in 2025. From business plans already complete 2025 looks to be a very positive year for dairy farmers.
- Milk Volume & Price
The volume of milk produced in the country has been seriously challenged over the last 2 years. The backend of 2024 provided a welcome boost after a very difficult Jan to July 2023. Hopefully the weather will play its part in 2025 and the volume of milk will increase again, the milk processors need it to pay for all that stainless steel. Teagasc have projected a 4% increase in milk volume.
The milk price is also on an upward trajectory, the annual average milk price is forecast to improve relative to the 2024 level. This means annual average milk prices received of approximately 55cent/litre for milk supplied including solids and bonuses. This of course will vary depend on your milk system of production.
- Input prices
The outlook for input prices presently in an around 2024 costs of production. The big ticket items of feed and fertiliser look fairly stable at present. Obviously the weather will impact feef and fodder usage and costs but taking a normal weather year cost should be equal or down on 2024.
- Nitrates
This is the big elephant in the room, we have one more year of the current nitrates derogation, so its business as usual in 2025. But what will happen in 2026, will there be 1) continue as present for another 4 years 2) no derogation or 3) a mixture of both over a time period. Dairy farm businesses really should have this decision made now as time is needed to plan any changes. The recent good new on water quality results from the EPA is the first step to getting another derogation for 2026-2029.
- Capital Expenditure
With plenty surplus cash projected in dairy fam business for 2025, where will farmers spend proceeds?
Many long established dairy farmers have very little need for capital expenditure on their farms as their farm businesses are well developed, these farmers might buy land if it comes up locally, it’s an investment asset they know and it’s a future hedge against any nitrate surprises. They might also invest some cash in green energy like solar panels or they may invest off farm.
Other dairy farmers who have expanded recently and are not cash rich could still be tight on cubicle spaces and slurry capacity, these farmers will add onto existing facilities to comply with regulations.
However, many farmers will keep the cheque book in the pocket until they know what is the direction of travel of the nitrates derogation. This is probably a smart move.
- Future
The future of Irish dairying is difficult to call until the plan for the nitrates derogation is clarified by the EU. In simple terms a continuation or slight modification of the existing derogation will allow Irish dairy farming to continue on its path of improvement in water quality and reducing greenhouse gases. In contrast if it was removed this time next year there will be absolute carnage in the dairy industry.
Across the water the dairy industry in the United Kingdom is grappling with what direction to take into the future. Doing Dairy Differently is presently a popular concept being discussed. The dairy industry is increasingly challenged for its environmental impact and its ongoing social licence with consumers. More and more farmers in the UK are exploring ways to do dairy differently, whether that’s enabling cow/calf contact, share milking with calves, integrating into arable systems or finding alternative routes to market that create stronger connections between the farm and the consumer. The UK dairy industry is certainly not a cohesive as the Irish Dairy Industry, there is no joined-up approach or cohesive plan from government like we have done here in recent years. All the different actors are pulling in different directions.
We can learn from the turmoil and uncertainly in the diary industry in other countries and ensure our industry continues to be cohesive and have a clear direction of travel.
I suggest an extension of the current nitrates derogation for a period of 10 years and allow dairy farmers to get on with improving water quality, reducing greenhouse gases, protecting/enhancing biodiversity and of course producing quality milk.
2025 will be a year to sit and hold until we have a clear direction of travel for the industry.