The news from Teagasc that dairy farmers could see their incomes fall by 50 per cent next year will make for grim but hardly surprising reading for a sector that has benefited from historically high prices in recent years.
A precipitous decline in dairy prices has been widely predicted for much of this year as good weather, increased production, falling demand globally and historic changes to the management of the dairy sector in the EU loom large on the horizon.
In its Dairy Quarterly published in October, Rabobank warned of a "prolonged period ahead of low prices" because of strong supplies from exporting countries, a Russian ban on certain imports and weaker than anticipated demand in the hugely important Chinese market.
Over the last two years, global dairy consumption growth has been significantly ahead of production growth which has led to historically high prices. And good weather coupled with these higher than normal prices over the summer led to European milk production increasing.
Grain production has been stronger than normal over the last two years and that has made milk cheaper to produce which has increased production, particularly in the US.
And then there is the issue of milk quotas. They have always kept a cap – if you will pardon the pun – on dairy production but with quotas to be abolished next April, dairy farmers across Europe have been gearing up to ramp up production from the beginning of April.
On the surface, it is hard not to have sympathy for any sector that is facing into such a significant cut in income – imagine the outcry if the public sector was being asked to take a 50 per cent salary drop between now and the end of the year – but at least the sector can take some comfort from the fact that it has been here before. And not too long ago.
Dairy prices in Ireland have resembled a particularly terrifying rollercoaster over the last eight years. In 2006, the per litre cost of milk was 30 cent. It climbed to 45 cent two years later, before dropping back to lows of just over 20 cent in January 2009.
Spread over the 12 months of last year, the average price was 38 cent and it was much the same this year.
In 2015, milk prices per litre are set to fall to 27 cent and they could fall even further than that.
Dairy farmers will make little more than 2 cent profit on each litre of milk they produce, a decline of 82 per cent in just a year. This decline will hit 18,000 dairy farmers hard and the ripples will be felt across the rural community.
All this without even the slightest guarantee that consumers at large will benefit from any noticeable price declines on supermarket shelves.
The new EU Agriculture Commissioner Phil Hogan will be well aware of the consequences these shifting prices will have on many communities, many of which are in his back yard. There have been calls on him to intervene and modify the subsidies paid to dairy farmers in order to help them cope with a calamitous decline in prices.
As yet there is no indication he is listening.
