This year has proved to be a difficult one on many dairy farms between substantially lower milk prices than 2025 and difficult weather. Even though milk prices remain high by historical standards, profit margins on dairy farms have been reduced because costs are so much higher now than even five years ago.
After the dramatic fall in milk prices during autumn 2025, we knew heading into 2026 that lower milk prices and high costs would significantly reduce cash flow and profitability levels. Although livestock sales have buffered the 20% reduction in milk revenue so far during 2026, farm incomes are nonetheless expected to be 50% below 2025 levels (equivalent to a €75,000 reduction in farm income on the average farm). This was even before higher fertiliser and fuel prices were factored in.
Many farmers made a conscious effort to reduce concentrate feeding levels and make better use of slurry this year to trim farm costs when margins were expected to be under pressure.
This was working well up to mid-summer, as reduced feed use had negligible impacts on animal performance on most farms.
A very wet April and severely dry July and August almost nationwide have now negated these early season feed savings while fertiliser prices increased during the year. It now looks likely that feed and fertiliser bills will end up higher than 2025 as farmers try to source additional winter feed reserves.
For all the difficulties though, dairy farmers have done exceptionally well to maintain herd performance at near 2025 levels under such challenging circumstances.
While milk production levels and revenues are no measure of profitability, the resilience of Irish dairy farms to maintain productivity under such difficult conditions is unquestionable.
Now is a good moment to take stock of the financial position of the farm as we have a good idea of likely revenue and costs for the remainder of this year.
Getting an accurate picture on the year end position now is important as it helps to create plans for the next six months and manage tight cash flows until the April milk cheque arrives in May 2027.
I sometimes see farmers glaze over when they hear of cash flow plans as they think of massive Excel sheets with endless rows of data. It doesn’t have to be like this.
Completing a very basic cash flow forecast to year end covering milk receipts and livestock sales, together with the main costs, can really help to plan the rest of the year on the farm.
The main steps to complete a cash flow budget are outlined here.
Step 1
Begin with the current account balance on 1 October as the starting point.
Step 2
Work out how much money is expected to come in through milk and stock sales between now and year end.
On 1 October, the most recent milk statement available is for August and September milk payments have not yet been received.
Be realistic on milk yield and milk price projections by comparing the August statement to August 2025. While dairy market prices are improving, milk prices are in or around €5.40/kg MS for August 2026 and look likely to remain similar from now to year end.
Usually, 75% of all milk is supplied by the end of August each year for spring calving herds. It’s also worth considering that, based on recent CSO estimates, cumulative milk production is approximately 5% below 2025 levels for most herds, equivalent to 10-20kg less milk solids per cow.
Step 3
Go through all invoices and work out how much money is owed for goods or services already incurred.
Focus on the five main cost areas (wages/drawings, feed, fertiliser, contractor and youngstock costs) as these normally represent 75% of the total costs for the year and most of these costs are now well-known.
For items like meal and fertiliser, it may be easier to work out quantities first and then convert that to price per unit if there is a big departure from last year. Ring the contractor for an invoice at this point, as its a big bill which is hard to estimate.
Step 4
Bank repayments will mainly be similar to 2025 unless something has changed. Equally, as tax bills for sole traders or preliminary taxes for companies have to be paid this autumn, these need to be included here.
Step 5
When all these areas are filled, the net year end cash position and predicted bank balance can be worked out by difference.
If this final bank balance position is less than or even close to zero, then planned costs will have to be looked at again or extra finance introduced in order to pay all bills and maintain drawings.
To go step-by-step through the process we have completed the example (below, left) for a 110-cow herd comparing 2025 and 2026. While every farm is different, and will have different commitments, the example provides an indication of how cash moves through a typical dairy farm from now to year end.
Looking at the differences between 2025 and 2026 from 1 October to the end of the year, we are assuming the farm will be paid for September milk but not December milk within the period and that all surplus stock at hand will be sold during the period.
The case study is based on a dry farm which has incurred two months of extra feed costs this year which has not yet been paid for. Most other bills are up-to-date to the end of August, except for the contractor bill which is still outstanding.
As evidenced from the projections, while the milk price during the remaining months of 2026 is expected to be similar to 2025 levels, the reduction in milk solids production, coupled with increased feed costs will result in a substantial negative swing in cash flow of approximately €50,000 for 2026 compared to 2025.
The example serves to indicate how a simple cash flow analysis can be completed for a dairy farm with a reasonable level of accuracy to the end of 2026.
Each farm family should do a similar exercise now to get a more accurate picture of their own farm.
If you find that the farm is reaching near zero or negative bank balance at year end, it may be possible to defer some costs or sell additional surplus stock between now and year end to achieve a positive cash flow.
Alternatively, farmers will have to delve into cash reserves to meet commitments.
In any case, it is advisable to seek help from your advisor, your co-op and your bank financial specialist to access additional funds, if needed, as soon as possible.
In addition to substantially lower milk prices than 2025, increased feed and energy costs in particular have placed additional pressure on dairy farm cash flows this autumn.
As the dust settles on the year, now is a great time to review costs and revenue to year end and plan for 2027. Dairy farms will pay out more money on expenses than they take in from now up to when the April milk cheque arrives next May, so planning and prioritising expenditure is critical over that period.
There are always new investments planned on dairy farms and a lot of this work ends up happening during the dry period.
At the same time, dairy farmers, in general, are not good at doing cash flow budgeting, instead preferring to dig into overdraft facilities when required. Overdrafts are expensive and so it’s preferable to plan ahead and use the cheaper financial options available, if necessary
Cash flow budgeting doesn’t have to be a complicated task, as our example shows. It is crucial to clarify what work can and can not be done between now and next summer. At this stage in the year, the remaining revenue from milk and livestock sales are well known and will be similar to 2025 for the rest of the year.
The greater difficulty is on the cost side where feed and contractor bills will have increased on 2025 and can be harder to estimate. Invoices for these may not come in until late in the year in some cases.
Knowledge is power, so picking up the phone and ringing the contractor is worthwhile to get the bad news sooner rather than later.
Getting the information together and doing the cash flow plan will provide a clear picture of where the farm is in terms of meeting all commitments over the next six months.
At the Ploughing Championships during September, the main banks were very keen to point out that they have flexible financial options available to support farms in tight cash flow situations.
They will want a financial picture for the farm for 2026 to access these schemes so preparing a simple cash flow will be required anyway.
SHARING OPTIONS