Dairy farmers worldwide are experiencing the “pressure of rising milk production costs” with Ireland one of the regions identified in a new Rabobank report where total production costs “have surged”.
Rabobank researchers compared costs in local currencies and found that dairy farmers in Ireland experienced one of the biggest jumps in production prices – in the region of between 30% to 40%.
The report also highlights that the operating cost environment for average milk producers is likely to be “more expensive and variable over the next 10 years” compared to the last decade.
It said the key factors driving up costs are “structural factors such as regulatory pressures, energy transition costs, climate change impacts, and higher interest rates”.
Researchers at Rabobank examined total costs – farm working expenses and other costs – for milk production across eight regions – Argentina, Australia, California (US), China, Ireland, New Zealand, the Netherlands, and the Upper Midwest (US).
On average costs increased by 14% from 2019 to 2024 but notably the most significant increases were seen in Ireland and Argentina of between 30% to 40%.
The compared to production costs in the US, the Netherlands, and China which were between 10% to 20% higher in 2024 than in 2019 and around 25% in Australia and New Zealand.
Milk production
The Rabobank report outlines that in 2024 dairy farmers in the Oceania region – which includes Australian and New Zealand – achieved the lowest production costs, outperforming other regions by a margin of 17%.
China has emerged as more globally cost-competitive due to notably lower feed prices.
According to Emma Higgins, senior agriculture analyst for RaboResearch, the primary driver of rising milk production costs is farm working expenses, which have also risen by 14% since 2019.
“Feed expenses remain the largest cost category, with fluctuations in the volume and price of both homegrown and purchased feed significantly impacting total production costs and global competitiveness,” she added.
Higgins also highlighted that as production costs rise, dairy producers face increased vulnerability during milk price downturns.
“Adapting to these changes by mitigating or controlling costs will be crucial for survival and success in this new era.
“Producers who focus on enhancing production efficiency are better positioned to overcome these challenges, particularly as increasing stocking rates is less feasible in Oceania and Europe.
“Conversely, dairy producers in the US and Argentina, who do not face stocking limitations, are in a more favorable position for expanding milk supply in the future.”