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Rising costs a challenge for new dairy entrants in 2022

Rising costs a challenge for new dairy entrants in 2022

A cohort of farmers will convert to dairy farming in 2022. While prospects for milk price this year are positive, inputs cost are also increasing rapidly. In this article, Teagasc dairy advisor, Kevin Brennan, Oak Park, outlines what he recommends that new entrants should consider in the coming year

Projections from the Central Statistics Office (CSO) show that costs could increase by over €200/cow this year.   This extra cost is primarily coming from increased fertilizer and concentrate costs. This is clearly illustrated in the following table.

Table 1 Agricultural Input price index for fertilisers and feed stuffs.

Taking these extra production costs into consideration, new entrants need to ensure that these extra capital expenditures are accounted for to ensure that their money is spent wisely. Here are some of the actions and investments that such farmers need to be aware of in order of priority: 

Prepare a Budget

Although many new entrants will have completed a six year plan at this stage, it is important to ensure that this plan is updated to include the cost rises projected for 2022. Cash flow can be challenging for new entrants, particularly in the first few years of establishment. For more information on cash flow recording and budgeting click on the link below. 

Monitor & Budget Cashflow

High EBI stock

Invest in high EBI stock. High EBI dairy cows outperform their lower EBI counterparts in terms of greater production and fertility. High EBI stock deliver greater profit and enable a higher return on investment over a shorter timeframe.  New entrant dairy farmers should buy heifers with an EBI of over €200 with a fertility sub-index of over €100. In many cases, I’ve seen the herds of new entrants outperforming more established dairy farmers by buying high EBI stock.

Soil fertility

For new entrants, optimising soil health and fertility is essential for operating a grass based system. Correct soil pH first and then work on improving P and K indexes. Research has shown that correcting soil pH alone can increased N fertilizer utilisation by up to 53%.  Research shows that by increasing soil pH from 5.5 to 6.3, an additional 80 kg of soil N will be released over the course of the grazing season. 

Reseeding and incorporating white clover

As soil fertility is improved, reseeding is the next key investment for new entrants. Converting old pasture to new perennial rye grass swards with a high clover content can deliver the same annual yield of grass with 50-100 kg/ha lower fertiliser N, increase digestibility, milk yield and on farm profitability. Research has shown that milk solids yield can increase by between 25 and 30 kg per lactation on swards with a high clover content compared to perennial ryegrass only swards. Overall yield of grass will increase on reseeded swards which is highly correlated with greater farm profitability. 

For more information on cost control measures for 2022 see Cost control for 2022

Teagasc Advisors write regular articles of interest to farmers here on Teagasc Daily. Contact your Teagasc Dairy advisor at your local Teagasc office here for more information on converting to dairying.