EDITORIAL: Are we in a dairy sector bubble? Are Tipp farmers expanding beyond their means...
In this week's Nationalist and Tipperary Star
It would appear the dairy sector in Tipperary and across the country is booming and farmers want all the land they can get their hands on, but why?
A survey published this week by The Society of Chartered Surveyors Ireland, has revealed that its auctioneers and valuers are forecasting that the price of agricultural land nationally will increase by 8% on average this year, underpinned by a strong dairy sector.
Basically, strong demand for good quality land from dairy farmers is driving the market and causing per acre land prices in Tipperary to soar.
Dairy farmers are prepared to pay huge sums and with asking prices being met; it seems this is boom time for the dairy sector.
But is all of this expansion a good thing?
Experts from Teagasc note that milk prices have fallen back somewhat this year.
But, according to the survey, dairy farmers are continually ranked as being the most likely purchasers of land across the country.
It’s likely that changes to the European Nitrates Directive, particularly measures aimed at protecting water quality will have an impact on land prices, especially rental prices.
In order to maintain current levels of milk production - and to comply with the Directive - many dairy farms will need to either increase their land area or reduce milk production.
With dairy farmers unlikely to reduce production, this leaves only one option. Auctioneer James Lee, from John Lee & Son REA in Tipperary, says: “We’d expect the impact on sales and rental prices will be more acute in regions where dairy is the dominant farm enterprise and where stocking rates are higher.”
However, there is a caveat.
Milk prices have declined from their record levels and while still high by historical standards, the average net margin per litre is set to fall below 15 cent this year.
So, are we in a dairy sector bubble? Are Tipperary farmers expanding beyond their means or, based on land prices, is it genuinely boom time for the dairy sector...