Dairy Farmers Advised to Re-Appraise Business Strategies
17 November 2004
Changes in EU policy will demand a radical re-appraisal of business strategies by dairy farmers, a Teagasc national conference has been told.
Laurence Shalloo, of the Teagasc Research Centre at Moorepark, Fermoy, said that farmers who apply the best business principles to labour, investment and financial management have a secure future in dairy farming.
Addressing over 600 dairy farmers in Cork at the first of two Teagasc dairy conferences, he said low cost animal housing systems will play a crucial role in the development of a competitive dairy industry over the coming decade.
“Farmers who remain in milk will need to expand milk output by up to 50% on average. Such expansion will require extra animal housing on many farms. The capital cost of conventional housing systems is up to €160,000 for a 100 cow herd”.
“In contrast, out-wintering pads and an earth-bank tank for slurry and soiled water storage costs just €18,000 for a 100 cow herd. Our analysis shows that the key to maintaining real incomes is to expand using low-cost facilities”, said Laurence Shalloo.
Laurence Shalloo referred to earlier Teagasc analysis which projected a decline in the number of dairy farmers from 25,500 at present to 18,000 by 2010.
“The cost of the additional milk quota for those remaining in production will also need to drop significantly from its current prices of 31/c litre (€1.41/gal). Our analysis shows that the most efficient producers who purchase additional cows and build conventional housing in order to expand their output could only pay a maximum of 14c/litre for additional quota”.
“The price for milk quota must drop in 2005 and each subsequent year if the majority of farmers who remain in milk production are to have a viable future”, he said.
He also stressed the importance of reducing labour input from the current level of 45 hours per cow per year to 25 hours. The ultimate target must be one person managing a herd of at least 100 cows.
He said the availability of the necessary land will limit the ability of many farmers to expand.
“Our advice to farmers is to be slow to go down the road of high-cost dairying, using high concentrate or high maize silage feeding systems. Farmers should examine options such as land leasing, land swapping or farm partnerships rather than opt for the high feed cost approach”.
“Our analysis clearly shows that the most profitable spring milk production system now and in the future is where the proportion of grazed grass in the diet of the dairy cow is maximised. At current concentrate feed prices and with the projected drop in milk prices, the economics of high-cost production systems do not stand up”.
“Where extra land cannot be sourced, the option of expanding the dairy business through feeding higher concentrate feed or maize silage may have a place if farmers are willing to discount the cost of labour. But very close scrutiny has to be placed on the prices paid for the bought in-feeds,” he said.
Proceedings of the National Dairy Conference are available. (1.47MB PDF document)
