IFA has undertaken a cost benefit analysis of the various milk price incentives offered by dairy processors to encourage farmers to supply more milk during off peak months.
Five processors offer out of season bonuses for milk supplied over the winter period (November to February). This analysis shows that some of the actions required to achieve these bonuses are costly and, in some cases, outweigh the return.
IFA Dairy Chair Martin McElearney said farmers need to analyse the full costs and benefits of chasing these so-called bonuses. “A flatter milk supply curve works for processors as they make more efficient use of their plants, but does it make sense for farmers? This analysis attempts to answer that question,” he said.
Modelled on a 92-cow herd and a flat milk price of 46cpl, the analysis explores the revenue generated and the estimated associated costs of producing milk over the winter under five different scenarios.
These scenarios depict five typical ways in farmers might alter their production system to increase milk supply in winter.
“These incentives offered by processors may appear lucrative at first glance. However, the analysis shows that they can be significantly eroded by the additional costs associated with flattening milk supply on farms.”
“I would encourage farmers to study the various scenarios set out in the document. Everybody’s circumstances are different and it is for each farmer to make the right decision for their farm and for themselves,” he said.
“Ireland has a natural advantage in our grass growing season. Farmers structure their farming system to maximise the amount of milk we can produce from grass.
While this poses seasonality challenges for processors, farmers need to do a full analysis for their farm before changing their system to chase incentives,” he said.
The analysis is available on the IFA website .