The headwinds of soaring energy costs and key inputs are starting to have an impact on the sector. Various hedging mechanisms and the forward-buying of inputs has provided some protection in 2022, but most of these are starting to unravel, exposing food production to the full impact of what is now a much higher cost base.

As Jack Kennedy reports in this week's edition, labour and energy costs are going to dramatically affect processing costs. Using figures from Tipperary Co-op, soaring energy prices look set to increase the cost of processing milk by the equivalent of €100 per cow or over 2c/l. Labour costs have also jumped.

The temptation to follow the lead of Boortmalt and simply pass this cost base back on to farmers must be resisted. Co-op boards have a key role in ensuring this is the case.

Rising costs

Like the processing sector, farmers are also seeing costs spiral inside the farm gate. Those who carried fertiliser stocks through from 2021 are facing a very different cost base in 2023. Aligned to this, the cost of essential materials, machinery, energy, concentrates and building works have all soared along with household expenditure. In the absence of a sustained increase in farm output prices, the financial outlook for 2023 is very different to 2022. Farm expenditure and investment must take account of this.