A sharp reduction in milk prices and very high production costs could see dairy farm incomes halved in 2023, compared to the very high levels last year.

The family farm income (FFI) for Irish dairy farmers increased by 53% to an average of €150,884 last year, which was driven by a significant rise in milk prices.

Data representative of 15,319 dairy farmers shows that the average income on dairy farms in 2022 was €2,332/ha. This reflects a year-on-year increase of €794/ha.

“Sharply higher” milk prices were observed in 2022, however production costs were up by 32% on average, according to Teagasc’s National Farm Survey 2022.

Dairy farm 2023 outlook

While last year was quite an “excellent” year for Ireland’s dairy and tillage sectors, the same cannot be said for 2023 to date, according to research officer at Teagasc, Trevor Donnellan.

“We saw a very big increase in milk prices internationally in 2022 and an even larger increase in the case of Ireland.

“We are seeing the flipside of that now in 2023 where the Irish milk price is falling to a greater extent than the milk prices in other European countries.

“That’s because the Irish milk prices have reached such a very high level, there is not the same level of international demand for dairy products in 2023,” Donnellan told Agriland.

Very high costs for milk production are continuing at the moment and will squeeze dairy farm margins in 2023, according to the research officer.

Ireland could face a situation where average income levels on dairy farms could be halved, falling back to €75,000 in 2023, Donnellan said.

So far this year Ireland has seen a sharp reduction in milk prices, dropping from very high levels in 2022 back to levels that, he said, are probably considered “more normal” price levels for milk.

“If we are going to contrast what has happened in 2022 with what is likely to happen in 2023, we will see a big income difference in both dairy and tillage in those two income years,” he said.