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Will a strong milk price maintain profit margins in the face of rising production costs?

Agri-economist, Trevor Donnellan, joins Emma-Louise Coffey on this week’s Dairy Edge podcast to discuss the dramatic rise in production costs and speculates whether strong milk price can maintain profit margins.

Prior to the war in Ukraine, milk price was set to decline from early 2022. Following the outbreak of war, milk price has continued to rise and outlook remains high until at least Q3 of 2022.

High milk price being received by Irish dairy farms is driven by strong dairy product pricing as well as lower than anticipated milk supply in the southern hemisphere and logistical and processing capacity issues from additional milk in the US.  

From a cost of production standpoint, fertiliser price remains high at up to €1,000 per tonne while projected concentrate feed is expected to run 20% ahead of 2021 prices. Energy costs in the form of green diesel and electricity are projected to run to 60% and 30%, respectively, ahead of 2021.

Trevor explains that dairy farmers are well placed to maintain strong profit margins despite rising costs due to the high milk price being received in 2022.

For more information: Situation and Outlook for Irish Agriculture revised April 2022 (pdf)

For more episodes from the Dairy Edge podcast go to the show page at: www.teagasc.ie/thedairyedge 

The Dairy Edge is a co-production with LastCastMedia.com