Dairy Farming in a post quota world [Approved by F&F Mods]

Irish Dairy 2015

Hello farmers,

I am in the early stages of producing a university project concerning the future of dairy farming in Ireland in a post quota world. Between the reports from Teagasc, Food Harvest 2020, the Department of Agriculture and Enterprise Ireland it would appear the future is rosy and all the dairy farmers will be rolling in clover this time next year.

I am guessing many dairy farmers (particularly those with small herds) may have something different to say about this.

So what I would really like to know is….

- Will you be expanding your levels of production this year (if so, will you be doing it by increasing the herd, the yield or both)?
- Will you be making capital investments in the farm within the next 24 months? (Are the banks amenable to lending to the dairy sector?)
- At what price will it become uneconomical for you to keep producing milk (considering the drive to replicate the New Zealand system where farmers are receiving just over 20c a litre)?
- Do you feel enough has been done to help you boost production in the post quota environment? (What sort of advice has Teagasc, your Co-Op or the banks given you)
- Will it be feasible for farmers with less than the current average herd size of 60 to continue farming in the future?
- Are you optimistic for the short/medium/long term future of dairying in Ireland?

At this stage I am really just trying to get a feeling directly from the farming community towards the imminent changes in the industry.

Any opinions you could share with me on any of the above subjects would be of immense help to me. Please be aware that I am not a farmer or from a farming background, so I apologise in advance if I may appear a bit clueless on the realities of dairy farming in Ireland.

I appreciate any input you can offer.

Thanks

Jamie


Mod Note:

Survey approved by F&F moderators, with the proviso that it's limited ONLY to this thread.

~mike_ie

blue5000

Have you a link to surveymonkey etc. or do we just dive straight in here? Best of luck with the masters, and welcome to boards.

mahoney_j

Irish Dairy 2015 wrote: »

Hello farmers,

I am in the early stages of producing a university project concerning the future of dairy farming in Ireland in a post quota world. Between the reports from Teagasc, Food Harvest 2020, the Department of Agriculture and Enterprise Ireland it would appear the future is rosy and all the dairy farmers will be rolling in clover this time next year.

I am guessing many dairy farmers (particularly those with small herds) may have something different to say about this.

So what I would really like to know is….

- Will you be expanding your levels of production this year (if so, will you be doing it by increasing the herd, the yield or both)?
- Will you be making capital investments in the farm within the next 24 months? (Are the banks amenable to lending to the dairy sector?)
- At what price will it become uneconomical for you to keep producing milk (considering the drive to replicate the New Zealand system where farmers are receiving just over 20c a litre)?
- Do you feel enough has been done to help you boost production in the post quota environment? (What sort of advice has Teagasc, your Co-Op or the banks given you)
- Will it be feasible for farmers with less than the current average herd size of 60 to continue farming in the future?
- Are you optimistic for the short/medium/long term future of dairying in Ireland?

At this stage I am really just trying to get a feeling directly from the farming community towards the imminent changes in the industry.

Any opinions you could share with me on any of the above subjects would be of immense help to me. Please be aware that I am not a farmer or from a farming background, so I apologise in advance if I may appear a bit clueless on the realities of dairy farming in Ireland.

I appreciate any input you can offer.

Thanks

Jamie


Mod Note:

Survey approved by F&F moderators, with the proviso that it's limited ONLY to this thread.

~mike_ie

To answer ur questions
1 plan on expanding nos and output per cow this year .cow mod up by 26% and production up by 500 ltrs per cow

2 loan of circa 50 k for new cubicles,feed space ,slurry storage and yard improvement.bank is amenable

3 break even price is 29 cent so if price goes sub that cuts will be made

4 lots of advice out there.its up to us to marry it and tailor it to our own land base and system.advice has been control costs,grow and utilise as much grass as possible before supplementation.keep things simple

5 u can make a living on 60 cows but u need low or no debt .and a good grasp of how to control costs,a wife with off farm job a help!!lots of 60 cow men making more than lads milking 120.al about efficency

6 long term I am optimistic re a future in dairy farming with a sub 100 cow herd.ability to ride out peaks and troughs will be cruical though.

Best of luck,hope that helps

Timmaay

- Will you be expanding your levels of production this year (if so, will you be doing it by increasing the herd, the yield or both)?

About 20%, split 1/2 and 1/2 between extra cows and extra yields.


- Will you be making capital investments in the farm within the next 24 months? (Are the banks amenable to lending to the dairy sector?)

Purely depends on the price of milk, but yes, I'd expect to invest about 150k in increasing the herd side by approximately 75%, this investment will be sourced from both cash flow (assuming the milk price improves), and bank loans. Banks are willing to lend once you show sufficient and realistic business projections.


- At what price will it become uneconomical for you to keep producing milk (considering the drive to replicate the New Zealand system where farmers are receiving just over 20c a litre)?

Depends on a few variables, the biggest and least predictable is the weather, other input costs will effect it also, but long term it would be totally impossible to produce milk for less than 30 cent, anyone with costs of production anything at the low 20s are usually doing something like putting off investment such as P/K, reseeding etc.


- Do you feel enough has been done to help you boost production in the post quota environment? (What sort of advice has Teagasc, your Co-Op or the banks given you)

Yes, loads of advice, only extra advice that would be useful is to emphasise the point that no one method or advice fits all, every single farm is different.


- Will it be feasible for farmers with less than the current average herd size of 60 to continue farming in the future?

Will become increasingly more difficult 2bh, nobody will start dairying with the end goal of just 60 cows, they will never cover the investment and pay themselves a wage, only hope is the most efficient (top 10%) with zero borrowing, even theses will have to accept serious lifestyle restrictions, limited cash to hire relief milkers etc, dependence of family labour etc.

- Are you optimistic for the short/medium/long term future of dairying in Ireland?

Short and medium term (ie next 10yrs), yep optimistic enough that farmers who own a large part of their land will be able to make a reason living once they are decent businessmen, longer than that it's just wayyy too early to tell, too many potential hurdles, climate change being a huge one, my farm could turn into a dust bowel every summer making dairying uneconomical (but at least there is a beach 20meters from our land ha!), then other political influences, world price of corn, other low cost markets such as Brazil/Chile entering the market, then the demand side, will China's appetite for dairy products continue or not?

Irish Dairy 2015

Thanks for the replies there guys, very helpful.

It is interesting to see that already there is a slight divergence on the financial viability of small herds. Up until about two weeks ago I was completely ignorant about the whole industry (I had heard that Ireland produced a bit of infant formula alright but I was not aware of the scale of dairy exports). Now with the removal of quotas and the fact milk is just a globally traded commodity, Ireland could be on the verge of a massive windfall for the country if it makes the right decisions or could entirely wipe out the local industry if it make the wrong ones. It is an interesting debate and is one that the wider public should be aware of.

Blue-5000 - I have not put together a Survey Monkey form just yet, as I am still trying to work out exactly what angle I will be taking. At the moment I am just trying to get a grasp of the main issues facing the industry approaching the end of the quota. Don't feel you have to stick rigidly to the questions i posed, I am interested in hearing any opinions from dairy farmers concerning the quota removal/expansion of the industry.

Timmaay - I agree with you on the long term aspects. China's taste for milk (and then there inability to supply the domestic market) will make or break the exporting dairy industries of countries like Ireland or New Zealand. When increased competition from the South Americans is factored in, it will become interesting to say the least.

Mods- Sorry for not reading the rules first. I will keep my requests for information confined to this thread.

tommyc123

Irish Dairy 2015 wrote: »

China's taste for milk.

The Chinese seem to have gone off the taste. Not lookin too great for the dairy farmer in Ireland these days !!😓

keep going

A little suggestion, to give a bit of background and maybe it might give an insight into herd size and viability why not look back at the last 50 or 60 years.expa ding by numbers mainly this year and next and then hope to increase production per cow off grass.found banks alittle too helpful now that I have to make repayments.loads of information and advice out there but you have yo make up your own mind and stick to it.smaller herds survival comes down to down to how much mon ey you have to make, if you can live on what you are making from thirty cows, you nit going to live two lives on 60

visatorro

expanding,, No
capital investment,, at crossroads re a project alright, don't trust banks thou!!! I have to make my mind up in next six months
breakeven,, as timmaaay says this varies more less every year. some years I could survive at 20. others years I need 32/33 to cover costs.
boost production,, I think too much is being done. its like telling people to get onto property ladder. unfortunately this is a country that loves the bandwagon, and there always a percentage who will expand because the neighbour is, or the newspapers and banks say its the right thing to do. and not be able to manage in reality. more milk isn't more money
60 cows or less,, absolutely place for guys like this. some of the best operators I know are operating at this scale. best of both worlds. family time and no major bills
optimistic,, I don't think anyone really knows where we'll be in ten years time. personally china wont make any country rich, wouldn't say it ever has. I don't really buy into this crack that we are able to withstand years of low price because of our grass based system. what % of the world is produced by grass based systems? if this statement was through NZ and ourselves would be the only places milking

blackdog1

You should also ask why teagasc are pushing for harvest 2020 and look in the dairy research levy that every dairy farmer pays.

kowtow

I'm sorry I can't give you any practical reply as we are a niche herd, but if I were in your shoes I would be looking hard at:

1. the fixed cost base of dairy farms, including a realistic labour charge per labour unit, and how many cows that can support either spring calving / grazing or (for comparison) ayr calving and part or all indoors.

2. The variable cost but including a land charge (rent equivalent perhaps) for land already owned as well as newly purchased / rented land.

These two points are often shrouded in mystery in this country as both inherited land (the typical 50 odd acre family farm perhaps) and family labour are often treated as "non cash items" when figuring cost of production. Clearly this can only go so far if expansion is on the cards as at some point land must be bought or labour employed.

When we hear about Ireland's "cost advantage" I think we are often talking about cashflow advantage - for example a well run moderately stocked herd on a 50-100 acre holding which can be run by one full time labour unit plus family is unlikely to run out of cash and go out of business - often because there will be an additional income in the family coming in to help in the hardest times. In a scenario like this, in one sense the co-op buying the milk is likely to run out of cash before the farmer does. If milk prices were to settle at a new lowish base, of course, few would want to continue at this indefinitely without reward.

On the other hand, those who have borrowed or rented to expand - or will do so in the future - must look at things slightly differently, ensuring that they have a true (cash) profit margin to pay labour and pay for land. If low price years are loss making in whatever system they choose then they must have sufficient volume in high price years to buffer the cash losses of the future. Fixed costs become a current issue - and you need to take full time salaries and land charges and allocate them to each litre of milk produced. Others will have better figures than me but I would have thought land & labour could add 12-15c / litre based on a 5000 litre average. It may be - and I am not suggesting this is the case - that if the same 12-15c of land and labour could support a 10,000 litre cow in a housed system the additional variable feeding costs begin to sound less outrageous.

The figures above are plucked out of my head, what I am getting at is the vital trade off between intensive high volume systems which many other countries have settled on, the grazed grass system which seems such a no-brainer when so many of the true fixed costs can be ignored temporarily in the hardest years.

In short, a great deal depends on how many of your fixed costs must be paid in cash.

alps

kowtow wrote: »

I'm sorry I can't give you any practical reply as we are a niche herd, but if I were in your shoes I would be looking hard at:

1. the fixed cost base of dairy farms, including a realistic labour charge per labour unit, and how many cows that can support either spring calving / grazing or (for comparison) ayr calving and part or all indoors.

2. The variable cost but including a land charge (rent equivalent perhaps) for land already owned as well as newly purchased / rented land.

These two points are often shrouded in mystery in this country as both inherited land (the typical 50 odd acre family farm perhaps) and family labour are often treated as "non cash items" when figuring cost of production. Clearly this can only go so far if expansion is on the cards as at some point land must be bought or labour employed.

When we hear about Ireland's "cost advantage" I think we are often talking about cashflow advantage - for example a well run moderately stocked herd on a 50-100 acre holding which can be run by one full time labour unit plus family is unlikely to run out of cash and go out of business - often because there will be an additional income in the family coming in to help in the hardest times. In a scenario like this, in one sense the co-op buying the milk is likely to run out of cash before the farmer does. If milk prices were to settle at a new lowish base, of course, few would want to continue at this indefinitely without reward.

On the other hand, those who have borrowed or rented to expand - or will do so in the future - must look at things slightly differently, ensuring that they have a true (cash) profit margin to pay labour and pay for land. If low price years are loss making in whatever system they choose then they must have sufficient volume in high price years to buffer the cash losses of the future. Fixed costs become a current issue - and you need to take full time salaries and land charges and allocate them to each litre of milk produced. Others will have better figures than me but I would have thought land & labour could add 12-15c / litre based on a 5000 litre average. It may be - and I am not suggesting this is the case - that if the same 12-15c of land and labour could support a 10,000 litre cow in a housed system the additional variable feeding costs begin to sound less outrageous.

The figures above are plucked out of my head, what I am getting at is the vital trade off between intensive high volume systems which many other countries have settled on, the grazed grass system which seems such a no-brainer when so many of the true fixed costs can be ignored temporarily in the hardest years.

In short, a great deal depends on how many of your fixed costs must be paid in cash.

Quiet an interesting point made by a consultant friend of mine, who advises a few of these new eastern European large scale start ups, that from a competitive point of view we compete yo sell product against the established milk producing world where no capital is paid down, and the new world where for instance in Czech Republic, an operator doing an eight hour shift milking earns €300 a month.(parlour going 22 hours per day)
Now the business not paying down capital might not have a bright future long term but the banks will enable them to keep those units producing in some form. What has happened in Denmark over the last 10 years is a shining example of this...
The capacity of our competitor countries to stay producing cannot be underestimated. It matters little to milk purchasers and multinationals and indeed to the financial industry whether the operators make any profit....just as long as the product can be pumped out...

freedominacup

alps wrote: »

Quiet an interesting point made by a consultant friend of mine, who advises a few of these new eastern European large scale start ups, that from a competitive point of view we compete yo sell product against the established milk producing world where no capital is paid down, and the new world where for instance in Czech Republic, an operator doing an eight hour shift milking earns €300 a month.(parlour going 22 hours per day)
Now the business not paying down capital might not have a bright future long term but the banks will enable them to keep those units producing in some form. What has happened in Denmark over the last 10 years is a shining example of this...
The capacity of our competitor countries to stay producing cannot be underestimated. It matters little to milk purchasers and multinationals and indeed to the financial industry whether the operators make any profit....just as long as the product can be pumped out...

I could be wrong but I doubt if wages in the czech republic are that low. Based on their gdp and employment levels along with the very small number of people involved in agriculture due to opportunities elsewhere in the economy I can't see anyone working for that level of pay.