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Benchmarking Expansion on Irish Dairy Farms

As milk production expands in the next five to ten years, what are the benchmarks which Irish dairy farmers and the wider dairy industry need to focus on? Dairy farmers are faced with on-farm strategic decisions on how to produce this additional milk. It is important that appropriate benchmarks are used to measure performance. To address this issue Teagasc will host a dairy seminar this afternoon, Thursday 13 March in the Horse and Jockey, county Tipperary.

Milk production in the Republic of Ireland has been constrained by milk quota since 1984 but milk producers in Northern Ireland have not been similarly constrained, especially since 1995. By examining the changes which have occurred in the Northern Ireland dairy industry, we can gain some valuable insights into how the Irish dairy industry may change post-2015.

Teagasc researcher, Patrick Gillespie, discovered that there has been a 38% increase in milk output in Northern Ireland since 1996 with no change in cow numbers. The increase in milk output has taken place due to an increase of almost 2,000 litres per cow in milk yield, largely driven by a doubling in the level of concentrates used to 2,400 kg per cow. As a consequence, Northern Ireland milk production is considerably more reliant on concentrate feed than milk production in the Republic of Ireland and more exposed to feed price risk.

Commenting on the results of his comparison, the Teagasc researcher observed that while there have been many changes in the Northern Irish dairy industry, the returns generated by both Northern Ireland and dairy farmers in the South are similar (on a per hectare basis) and that Northern Ireland dairy farmers are not generating any additional reward to cover the increased risks associated with their system of milk production.

Brendan Horan, Teagasc Moorepark, will highlight that while the top 10% of established dairy farms are highly profitable, that milk price volatility is challenging the profit levels of the average dairy farmer. An examination of the performance of the top 10% of farms emphasises that they are achieving high levels of grass utilisation, have low interest and depreciation costs, are carrying higher stocking rates and achieving higher animal performance. Brendan Horan advises that ‘all expanding dairy farm businesses must be ‘resilient’ so as to insulate the business from milk price and climate instability and consistently meet profitability expectations’.

Teagasc will work closely with Irish dairy farmers to benchmark farm performance currently and post-quota abolition. Teagasc Head of Dairy Knowledge Transfer, Tom O’Dwyer, will urge dairy farmers to benchmark their farm performance before planning, or indeed undertaking, expansion: ‘it is really a case of better before bigger; expansion is only for those who are achieving the performance targets for their system of production’.

A new Dairy Scorecard concept which was developed by a working group set up by Teagasc will be launched at the dairy seminar. According to Tom ODwyer, ‘the Dairy Scorecard will allow all dairy farmers to compare their farm performance against a suitable comparison group and to identify those areas which need to be improved’. The Key Performance Indicators relate to grass, cows, costs and profit and this new Dairy Scorecard will be available for all dairy farmers by mid-year.

Finally, Teagasc Director Gerry Boyle, will emphasise the key role that Teagasc will play in supporting expansion in milk production both in terms of support for individual dairy farmers and also in terms of Teagasc’s collaborative work with industry partners in developing and launching initiatives such as the Dairy Scorecard.

This event is the first in a series of technical workshops that Teagasc will be holding in the countdown to the abolition of milk quotas. Future events will focus on physical and financial aspects of planning for expansion.