While the milk price signals are positive for the moment, there is an onus on us to step back from the coal face and at least discuss the moving parts.

It’s not to pour negativity on an improving situation, however, it is necessary to discuss some of the realities. Next week, milk suppliers will gather at the Positive and Grassland conferences to hear the latest advice and information before the February peak of calving.

While the price of fertiliser is well down on this time last year, the cost of milk production is still high. This time last year, farmers were asked to pay €3/kg for nitrogen (CAN €810/t) and €2/kg for protected urea (€900/t). However, this time last year milk price was 55c/litre, compared to 35c/litre right now.

Current day prices for fertiliser put nitrogen ranging from €1.20 (€550/t protected urea) to €1.40 per kg of nitrogen (CAN €380/t). This is still at a significant price premium on where we were not that long ago, at closer to 80 to 90c/kg of nitrogen.

The price of dairy feed is again at the higher end and in or around 40 cents/kg is a long way from the 20c/kg that farmers had become accustomed to.

Milk price

November milk prices are described in detail here. European prices for January have already been announced. Next week, we should get December prices in Ireland.

Just as an example of how European prices compare; A-ware, who have teamed up with Tirlán for investment in Ireland will pay 45 to 46 c/litre for January milk in the Netherlands. In November, we can see Tirlán, their Irish partners, paying close to 36 c/litre ex VAT – almost a 10 c/litre gap.

Milk suppliers will hope some of that gap will be made up in December and January and some of it will be market related. The prices used are solids adjusted to compare like with like, and include the Dutch grazing bonuses etc.

Land market

The introduction of a 220kg organic nitrogen (stocking rate limit of 2.4 cows/hectare) for most of the country means land for a grass-based dairy enterprise has become more important and more valuable.

The price of land in the Netherlands is averaging around €80,000 per hectare. The Irish average is equivalent to around €30,000 per hectare.

However, we know that good land in Ireland is making upwards of €60,000 per hectare where local competition is hot. The same is true in the Netherlands, where it reaches €140,000 per hectare in parts.

Land prices depend on a number of factors: these include national factors (like laws); regional factors (like climate and proximity to networks) and localised productivity factors (such as soil quality, slope or drainage).

The market forces of supply and demand, including the influence of foreign ownership rules or other local incentive schemes or tax reliefs, can also influence the price of agricultural land.

Competition for land comes not only from farmers, but also from others planning to use land for purposes other than agriculture.

Speaking of laws, as far as we know the much talked about dairy cow exit scheme is still in the mix. At exactly this time last year, the minister ruled out the suckler cow exit scheme at an IFA event in Limerick.

He left the dairy cow exit scheme on the table and it is still there.

When the minister announced it was still an option, milk suppliers hadn’t been told about the mid-term review clause in the Nitrates derogation.

That row took up the second half of 2023, with milk suppliers and processors coming to terms with a new Nitrates rule book.

Uncertainty

So in summary, in the dairy world there is still uncertainty at farm level in terms of where the allowed stocking rate will finish up.

Is 220kg the end game or will 170kg per hectare come into play soon?

The minister needs to push for some clarity on this with his EU colleagues, and he also needs to bring clarity to the dairy exit scheme. Both influence on-farm investment decisions.

There is little point in putting up more slurry storage if you will have 30% less cows.

Milk prices are improving and current market trends are positive. However, the cost of production relative to milk price is high.

While nitrogen has come back a lot in price, new restrictions on the amount of nitrogen you can spread mean farmers that were spreading to grow 15 tonnes can now only spread to grow 12 tonnes of grass.

It’s clear to see there are significant changes for all milk suppliers to contend with. Milk suppliers have a short window now before calving to distill what these changes, current input prices and new rules mean for their own farm situation.