Help for Dairy farm case study

siners71

Guys, apologises I'm advance of posting here. Im doing a case study on a dairy milk farm for my accounting finals, and I know nothing abt the industry, bar I drink milk in coffee & tea. Can someone guide me in direction of who I could talk to? I thought Teagasc and local small dairy farmer. My case study is based on a farm that has 1600 cows and involved in intensive farming., so I need info on the benefits, risks of such a enterprise. Can anyone advise me on where/ who I should be talking too.?

Again, I can't apologise enough for hijacking your boards discussion😨.

Thanks, Sinead

Farmer Ed

siners71 wrote: »

Guys, apologises I'm advance of posting here. Im doing a case study on a dairy milk farm for my accounting finals, and I know nothing abt the industry, bar I drink milk in coffee & tea. Can someone guide me in direction of who I could talk to? I thought Teagasc and local small dairy farmer. My case study is based on a farm that has 1600 cows and involved in intensive farming., so I need info on the benefits, risks of such a enterprise. Can anyone advise me on where/ who I should be talking too.?

Again, I can't apologise enough for hijacking your boards discussion😨.

Thanks, Sinead

This guys views would be worth looking into also just to get a different perspective. https://agrifoodsolutionsblog.com/ But Im sure Teagasc should be able to fill you in on BFP and the likes. Just be aware their milk production costs do not include everything and in spite of what George Lee might have you think. We are not all multi millionaires

RightTurnClyde

siners71 wrote: »

Guys, apologises I'm advance of posting here. Im doing a case study on a dairy milk farm for my accounting finals, and I know nothing abt the industry, bar I drink milk in coffee & tea. Can someone guide me in direction of who I could talk to? I thought Teagasc and local small dairy farmer. My case study is based on a farm that has 1600 cows and involved in intensive farming., so I need info on the benefits, risks of such a enterprise. Can anyone advise me on where/ who I should be talking too.?

Again, I can't apologise enough for hijacking your boards discussion😨.

Thanks, Sinead

Rowena Dwyer, chief economist in the IFA, or Thia Hennessey, economist in Teagasc, either might be worth talking to.

Buford T. Justice XIX

I've moved this from the Milk Price thread to its own thread.

greysides

1600 cows is outside Irish experience. Something more associated with Saudi Arabia and Masstock. The cost elements of such a farm would be very different and, most likely, in different areas to Ireland.

By any chance do you mean 160 cows?

alps

Thia Hennessy has recently moved from teagasc and has taken up a position in UCC.

You will have to go outside of Ireland to get such information. One group I would suggest to try to contact is the European Dairy Farmers (EDF) www.dairyfarmer.net
They have an irish group headed up by Tom Dunne and his contact details are on the Web site.
Another contact might be Agritech in Nenagh . They do advisory, mainly dietary, to a number of 1000+ cow units in eastern Europe. Their advisors are based in Ireland and would be accessible if they would be interested in helping.

Good luck with your project

siners71

greysides wrote: »

1600 cows is outside Irish experience. Something more associated with Saudi Arabia and Masstock. The cost elements of such a farm would be very different and, most likely, in different areas to Ireland.

By any chance do you mean 160 cows?

Yes, 1600 cows, the case study is a fictional farm in fictional country.(a load of BS really!) It's an accounting/strategy/risk exam. So the examiner makes up a fictional company:)

Farmer Ed

siners71 wrote: »

Yes, 1600 cows, the case study is a fictional farm in fictional country.(a load of BS really!) It's an accounting/strategy/risk exam. So the examiner makes up a fictional company:)

If its fiction you want, you may be in the right place. But don't let on that you are aware it's fiction as you just might ruin the game. You don't want to be the person breaking the news the Santa is not real now do you? ::)

alps

siners71 wrote: »

Yes, 1600 cows, the case study is a fictional farm in fictional country.(a load of BS really!) It's an accounting/strategy/risk exam. So the examiner makes up a fictional company:)

If it's fictional, you could do it here on boards. It will go something like this.

Sales 1600 × 5500 litres @28c/l 2,464,000
Calves 1550 X 80 124, 000
Cull Cows 240x500 120, 000
Less replacement hrs 240x1400 336, 000

I'm sure others will help with costs..
But be sure to include costs of 200/acre and you will need 1600 acres for grazing and winter feed, and most importantly €15 per hour cost (time tax ins) for each of your 16 employees.
Must go...

freedominacup

alps wrote: »

If it's fictional, you could do it here on boards. It will go something like this.

Sales 1600 × 5500 litres @28c/l 2,464,000
Calves 1550 X 80 124, 000
Cull Cows 240x500 120, 000
Less replacement hrs 240x1400 336, 000

I'm sure others will help with costs..
But be sure to include costs of 200/acre and you will need 1600 acres for grazing and winter feed, and most importantly €15 per hour cost (time tax ins) for each of your 16 employees.
Must go...

That'd be one way of doing it.

freedominacup

siners71 wrote: »

Guys, apologises I'm advance of posting here. Im doing a case study on a dairy milk farm for my accounting finals, and I know nothing abt the industry, bar I drink milk in coffee & tea. Can someone guide me in direction of who I could talk to? I thought Teagasc and local small dairy farmer. My case study is based on a farm that has 1600 cows and involved in intensive farming., so I need info on the benefits, risks of such a enterprise. Can anyone advise me on where/ who I should be talking too.?

Again, I can't apologise enough for hijacking your boards discussion😨.

Thanks, Sinead

Your case study surely had a bit more detail. He could be locked into a milk price in the mid forties for the next 18 months with all of his grain requirements forward bought at harvest '15 prices in which case his biggest problem will be what to do with all of the cash. Give us more details and you'll get some ideas on the risks.

siners71

Hi guys, really appreciate all your replies. I have complied a list of questions when I meet with a farmer or Teagasc rep.

My case study is based on a fictional dairy farm with 1600 cows in a fictional country called Hiland. They are holding 400 cows per shed with 4 sheds, all close by, and with 250-300 acres per shed of farmland to supply feed for the cows. Calves are left outside and not involved in milking until old enough.
The company is involved in Intensive Farming (indoors), and cows are milked twice daily, with a 3rd party Tanker collecting to bring to Supermarket processing unit for further modification into other milk products (milk only… not cheese, yougurt or butter)

List of Questions

Pros & Cons of
Indoor(all year round)
versus
Outdoor(grazing etc) farming?

Are cows more stressed in indoor farming? Leading to lower milk yields?

Is there a specific cow that’s best to use for indoor high yield milking?

If milking equipment broke down, how long can you leave it before the cow has to be milked? Does it have to be daily? If not milked, can this cause infection in cow, utters???

Is 250-300 acres of farmland (grow crops for animal feed) enough to feed 400 indoor cows?

If farm had 1600 cows, would it not make more sense to directly employ a vet??

If farm had 1600 cows, would it not make sense to have additional backup storage for milk, in case tanker doesn’t show (wintery weather) – or maybe the milk stored has a perishable date???


Setup

What is the main setup in Ireland?
Do farmers sell to Glanbia/Kerry group or co-ops?
Do farmers sell to Supermarkets directly?

If selling to the Supermarkets? Do supermarkets send Tankers?
If Supermarkets? Do they do further processing into “skimmed milk” and likes?

Prices – Milk?
Milk is a Commodity and traded on exchanges???

Supermarket price wars – forcing the farmer to accept the price, or do they take the hit?

Can you command higher prices, if you sell to someone other than Supermarkets? Ie sell to co-op?

Can you command higher prices if you do further processing yourself (in farm)?


Products
If country has a major agricultural industry, but has an economy more focus on manufacturing, how can this help? Could manufacturing help in further processing of milk? Is this currently happening in Ireland?


Milk when processed into Skimmed milk, can the cream element be used for other products?
I.e. can it be used for Fresh Cream, Butter, Yougurt, Cheese?

Baby powder formula. Whats the process here? Simply grounded? Whats the yield per litre of milk? Can you get higher prices for it?


Diseased/Sick Cows & Antibiotics
Is it normal practice for a diseased cow to be slaugthered, because the prices of medicine and vet are too high?

Antibiotics are seen as getting into the human food chain, and govts are taking steps to prevent it.
Is it likely that Antibiotics will be outlawed? And Vaccines taking their place? Are vaccines more expensive??


Alternative Energy
Are there by-products other than cow dung from having cows?

Is there anyone in Ireland using cow dung to convert to Energy (Biomass/Biodigesters)?
If not? Why not?

Are there potential synergies to be made?

freedominacup

siners71 wrote: »

Hi guys, really appreciate all your replies. I have complied a list of questions when I meet with a farmer or Teagasc rep.

My case study is based on a fictional dairy farm with 1600 cows in a fictional country called Hiland. They are holding 400 cows per shed with 4 sheds, all close by, and with 250-300 acres of farmland to supply feed for the cows. Calves are left outside and not involved in milking until old enough.
The company is involved in Intensive Farming (indoors), and cows are milked twice daily, with a 3rd party Tanker collecting to bring to Supermarket processing unit for further modification into other milk products (milk only… not cheese, yougurt or butter)

List of Questions

Pros & Cons of
Indoor(all year round)
versus
Outdoor(grazing etc) farming?

Are cows more stressed in indoor farming? Leading to lower milk yields?

Is there a specific cow that’s best to use for indoor high yield milking?

If milking equipment broke down, how long can you leave it before the cow has to be milked? Does it have to be daily? If not milked, can this cause infection in cow, utters???

Is 250-300 acres of farmland (grow crops for animal feed) enough to feed 400 indoor cows?

If farm had 1600 cows, would it not make more sense to directly employ a vet??

If farm had 1600 cows, would it not make sense to have additional backup storage for milk, in case tanker doesn’t show (wintery weather) – or maybe the milk stored has a perishable date???


Setup

What is the main setup in Ireland?
Do farmers sell to Glanbia/Kerry group or co-ops?
Do farmers sell to Supermarkets directly?

If selling to the Supermarkets? Do supermarkets send Tankers?
If Supermarkets? Do they do further processing into “skimmed milk” and likes?

Prices – Milk?
Milk is a Commodity and traded on exchanges???

Supermarket price wars – forcing the farmer to accept the price, or do they take the hit?

Can you command higher prices, if you sell to someone other than Supermarkets? Ie sell to co-op?

Can you command higher prices if you do further processing yourself (in farm)?


Products
If country has a major agricultural industry, but has an economy more focus on manufacturing, how can this help? Could manufacturing help in further processing of milk? Is this currently happening in Ireland?


Milk when processed into Skimmed milk, can the cream element be used for other products?
I.e. can it be used for Fresh Cream, Butter, Yougurt, Cheese?

Baby powder formula. Whats the process here? Simply grounded? Whats the yield per litre of milk? Can you get higher prices for it?


Diseased/Sick Cows & Antibiotics
Is it normal practice for a diseased cow to be slaugthered, because the prices of medicine and vet are too high?

Antibiotics are seen as getting into the human food chain, and govts are taking steps to prevent it.
Is it likely that Antibiotics will be outlawed? And Vaccines taking their place? Are vaccines more expensive??


Alternative Energy
Are there by-products other than cow dung from having cows?

Is there anyone in Ireland using cow dung to convert to Energy (Biomass/Biodigesters)?
If not? Why not?

Are there potential synergies to be made?

That sounds like a case study I would write to examine you on your understanding of biopharma factories owned by multinationals in a fictional country known as Erlnd.

kowtow

I'm not sure to what extent the OP needs to get involved in the intricacies of a dairy unit business plan, the variables of which are complex and normally the subject of ag science or similar, and of course very different potentially in the case of the two units he outlines.

I'll suggest at the end of this post a possible source for "model" plans for which there is real world paper backup and which might suffice.

But in the interest of context I will try to explain the dairy industry from my limited perspective.

There are two important curves or progressions upon which each dairy producing nation, and each dairy farm, must position themselves. They are related but not interdependent.

The first curve - if you like the small to big farm curve (but size is not always the determining factor) - runs in simple terms from extensive low input / output to intensive high input / output.

In essence most farms in Ireland would be on the left hand side of this curve with grass fed cows producing relatively low yields off largely outdoor grazing. Off farm feed costs (ration) and the labour and equipment associated with them would be minimised but the milk yield per cow is also only moderate - perhaps 5000-6000 litres per annum, albeit with high milk solids which is what Irish milk processors are actually buying. This is a low cost system, most particularly if you disregard the imputed cost of owned land and family labour (which is the local habit) when calculation the cost of production. It may be challenged when scale is attempted. It is often called a sustainable system, although resilient might be a better description as provided that the farm is not over-indebted and free family labour is available it's quite difficult to actually go bust.

An intensive herd - which a 1600 cow herd almost certainly would be - might well be housed for most if not all of the year, with feed brought in as silage alongside significant additional protein and energy concentrates, mixed and fed by machine, with the herd sometimes milked 3 or 4 times a day. Yield will be higher, sometimes 10,000 litres per cow or more but the proportion (though not the total) of milk solids will likely be lower. Variable costs per litre will almost certainly be much higher than an extensive system and, at scale, it will not be possible to disregard many fixed costs by taking refuge in cash accounting. Paid labour and the number of litres per FTE will almost certainly be an important metric.

Done well, either of these systems can be profitable but profitability depends also on the third curve, which I'll refer to as the output curve.

Every producing nation, and to some extent the different milk processors within that nation, have access to a mix of markets from premium local liquid milk to commodity dry powder, at it's lowest level a homogeneous product which can be traded anonymously. The level of returns from milk (essentially the net average national milk price) will be a function of the mix of product between those two extremes. A country like the UK with a large local liquid market is able to sustain higher core milk prices relative to a country like Ireland or New Zealand which produce a multiple of local requirements and must depend on exports. In some senses powder milk is "marginal milk".. with the price set by the marginal value of overproduction in various milk producing countries around the world. It is this milk price which Ireland depends on (leaving aside some of our premium products and niche markets) and, apart from anything else, low input resilient production is probably better suited to those price levels than - say - high input intensive production which might be seen in the UK.

So the interaction of those two curves, and a farm and nations position on them, is what will govern relative profitability in any given year, notwithstanding the fact that the whole base of the price curve will shift upward and downward with markets over the course of cycles.

At the farm level the interaction of inputs and outputs (everything from management, to breeding, to feeding) is highly skilled and good producers are able to find "sweet spots" between cost and output to maximise their relative profitability.

If you hunt around https://dairy.ahdb.org.uk/market-information/farming-data/promar-milkminder-dairy-costings/promar-milkminder-dairy-costings-national/#.V_4MvfkrKUk you will find some detailed costing data for both intensive and extensive systems which may be sufficient to form the basis of your study.

Many here will be able to give you much better guidance on the specifics of the individual farm.

Best of luck.

kowtow

See text in bold. I think you might be attempting something a bit outside the scope of accounting here, if you want to do it properly.

siners71 wrote: »

Hi guys, really appreciate all your replies. I have complied a list of questions when I meet with a farmer or Teagasc rep.

My case study is based on a fictional dairy farm with 1600 cows in a fictional country called Hiland. They are holding 400 cows per shed with 4 sheds, all close by, and with 250-300 acres per shed of farmland to supply feed for the cows. Calves are left outside and not involved in milking until old enough.
The company is involved in Intensive Farming (indoors), and cows are milked twice daily, with a 3rd party Tanker collecting to bring to Supermarket processing unit for further modification into other milk products (milk only… not cheese, yougurt or butter)

List of Questions

Pros & Cons of
Indoor(all year round)
versus
Outdoor(grazing etc) farming?

see my post above, but you really need a book to begin on that

Are cows more stressed in indoor farming?
sometimes, but cows are stressed by poor operators in any system
Leading to lower milk yields?
no, they will typically still be higher

Is there a specific cow that’s best to use for indoor high yield milking?
Holstein/Friesan

If milking equipment broke down, how long can you leave it before the cow has to be milked? Does it have to be daily? If not milked, can this cause infection in cow, utters???
Unusual for cows to be milked less than twice a day, this problem is not high up the list of issues for dairy farms as service available everywhere

Is 250-300 acres of farmland (grow crops for animal feed) enough to feed 400 indoor cows?
Others will know better but (a) unlikely and (b) I suspect you would run into EU nitrate regulations at those stocking rates. Some Dutch farms would be close to this?. You must also consider that even a mature milking herd of 400 would surely have 150+ followers, calves & maidens etc, to be fed, housed, etc.

If farm had 1600 cows, would it not make more sense to directly employ a vet??
maybe, but that would be a fairly minor decision in the scheme of things

If farm had 1600 cows, would it not make sense to have additional backup storage for milk, in case tanker doesn’t show (wintery weather) – or maybe the milk stored has a perishable date???
ditto


Setup

What is the main setup in Ireland?
Do farmers sell to Glanbia/Kerry group or co-ops?
Glanbia & I think Kerry are hybrids which are partly co-operative in nature, many other co-ops as well of course

Do farmers sell to Supermarkets directly?
not really

If selling to the Supermarkets? Do supermarkets send Tankers?
If Supermarkets? Do they do further processing into “skimmed milk” and likes?
no

Prices – Milk?
Milk is a Commodity and traded on exchanges???
some limited liquid on CME but powder, butter, mainly & also NZX & GDT powder
Supermarket price wars – forcing the farmer to accept the price, or do they take the hit?
not as important as you might think

Can you command higher prices if you do further processing yourself (in farm)?
yes


Products
If country has a major agricultural industry, but has an economy more focus on manufacturing, how can this help? Could manufacturing help in further processing of milk? Is this currently happening in Ireland?
debatable


Milk when processed into Skimmed milk, can the cream element be used for other products?
I.e. can it be used for Fresh Cream, Butter, Yougurt, Cheese?
yes

Baby powder formula. Whats the process here? Simply grounded? Whats the yield per litre of milk? Can you get higher prices for it?
You'll have to ask Colonel Glanbia for the secret recipe, but essentially yes


Diseased/Sick Cows & Antibiotics
Is it normal practice for a diseased cow to be slaugthered, because the prices of medicine and vet are too high?
no, although her condition may be a factor in deciding her future in the herd, i.e. a decision may be made to cull earlier rather than later while she still has an economic value and to safeguard milk quality etc. - but predominately slaughter decisions made on humane grounds, farmers don't give up cows easily when they have expended so much energy and hard work, let alone money, raising them from birth and bringing them to the parlour

Antibiotics are seen as getting into the human food chain, and govts are taking steps to prevent it.
Is it likely that Antibiotics will be outlawed? And Vaccines taking their place? Are vaccines more expensive??
I don't think one is a direct substitute for the other, but antibiotics are kept a long way from the human food chain by withholding periods etc. on both milk and meat


Alternative Energy
Are there by-products other than cow dung from having cows?

Is there anyone in Ireland using cow dung to convert to Energy (Biomass/Biodigesters)?

some, but not always cost effective with (southern) Irish farming systems and feed in tariffs.

If not? Why not?

Are there potential synergies to be made?

siners71

Super stuff there Kowtow, Im a complete townie, and have never been on a farm in my life, hence the need to visit one, and certainly ask these question.

Info that I am gathering here will help support any recommendations I will be giving in actual exam.

I have seen some info already on your link to the dairy.ahdb.org.uk, so I thank you for that.

Buford T. Justice XIX

kowtow wrote: »

I'm not sure to what extent the OP needs to get involved in the intricacies of a dairy unit business plan, the variables of which are complex and normally the subject of ag science or similar, and of course very different potentially in the case of the two units he outlines.

I'll suggest at the end of this post a possible source for "model" plans for which there is real world paper backup and which might suffice.

But in the interest of context I will try to explain the dairy industry from my limited perspective.

There are two important curves or progressions upon which each dairy producing nation, and each dairy farm, must position themselves. They are related but not interdependent.

The first curve - if you like the small to big farm curve (but size is not always the determining factor) - runs in simple terms from extensive low input / output to intensive high input / output.

In essence most farms in Ireland would be on the left hand side of this curve with grass fed cows producing relatively low yields off largely outdoor grazing. Off farm feed costs (ration) and the labour and equipment associated with them would be minimised but the milk yield per cow is also only moderate - perhaps 5000-6000 litres per annum, albeit with high milk solids which is what Irish milk processors are actually buying. This is a low cost system, most particularly if you disregard the imputed cost of owned land and family labour (which is the local habit) when calculation the cost of production. It may be challenged when scale is attempted. It is often called a sustainable system, although resilient might be a better description as provided that the farm is not over-indebted and free family labour is available it's quite difficult to actually go bust.

An intensive herd - which a 1600 cow herd almost certainly would be - might well be housed for most if not all of the year, with feed brought in as silage alongside significant additional protein and energy concentrates, mixed and fed by machine, with the herd sometimes milked 3 or 4 times a day. Yield will be higher, sometimes 10,000 litres per cow or more but the proportion (though not the total) of milk solids will likely be lower. Variable costs per litre will almost certainly be much higher than an extensive system and, at scale, it will not be possible to disregard many fixed costs by taking refuge in cash accounting. Paid labour and the number of litres per FTE will almost certainly be an important metric.

Done well, either of these systems can be profitable but profitability depends also on the third curve, which I'll refer to as the output curve.

Every producing nation, and to some extent the different milk processors within that nation, have access to a mix of markets from premium local liquid milk to commodity dry powder, at it's lowest level a homogeneous product which can be traded anonymously. The level of returns from milk (essentially the net average national milk price) will be a function of the mix of product between those two extremes. A country like the UK with a large local liquid market is able to sustain higher core milk prices relative to a country like Ireland or New Zealand which produce a multiple of local requirements and must depend on exports. In some senses powder milk is "marginal milk".. with the price set by the marginal value of overproduction in various milk producing countries around the world. It is this milk price which Ireland depends on (leaving aside some of our premium products and niche markets) and, apart from anything else, low input resilient production is probably better suited to those price levels than - say - high input intensive production which might be seen in the UK.

So the interaction of those two curves, and a farm and nations position on them, is what will govern relative profitability in any given year, notwithstanding the fact that the whole base of the price curve will shift upward and downward with markets over the course of cycles.

At the farm level the interaction of inputs and outputs (everything from management, to breeding, to feeding) is highly skilled and good producers are able to find "sweet spots" between cost and output to maximise their relative profitability.

If you hunt around https://dairy.ahdb.org.uk/market-information/farming-data/promar-milkminder-dairy-costings/promar-milkminder-dairy-costings-national/#.V_4MvfkrKUk you will find some detailed costing data for both intensive and extensive systems which may be sufficient to form the basis of your study.

Many here will be able to give you much better guidance on the specifics of the individual farm.

Best of luck.

Bet she's sorry she asked now:pac:

greysides

Buford T. Justice V wrote: »

Bet she's sorry she asked now:pac:

With that amount of typing, I bet he's sorry he started answering.

siners71

a glass of neat Vodka helps with translation:))

kowtow

siners71 wrote: »

a glass of neat Vodka helps with translation:))

The old lemonade stand has a lot to commend it... if you have time to change your case study.