Farm Ireland
Independent.ie

Wednesday 20 September 2017

Faraway fields can really be greener for young farmers

One of the top prices paid at the recent Tullow Mart sale was the €2,690 paid for this 980kg cow sold by Owen O’Neill (centre) from Corries, Co Carlow. Also pictured are Michael O’Neill (right) and Eric Driver, Tullow Mart manager. Photo: Roger Jones.
One of the top prices paid at the recent Tullow Mart sale was the €2,690 paid for this 980kg cow sold by Owen O’Neill (centre) from Corries, Co Carlow. Also pictured are Michael O’Neill (right) and Eric Driver, Tullow Mart manager. Photo: Roger Jones.

Mary Kinston

As this year's dairy season gets underway, it is haunted by the prospect of rock-bottom prices . But in the longer term most agree that dairying will still deliver good profits and an agreeable standard of living.

Therefore it is no surprise that the numbers of young farmers studying agriculture has risen substantially in recent years. However, is the induction of young family members directly into the family farming business after college the right career step? Working the home farm often seems the obvious move for a young dairy farmer after third level. It's also no surprise that the Land Mobility brokerage service have more enquiries from farmers looking for young farmers than from young farmers themselves wanting farms.

However, should dairy industry bodies and farmers themselves not promote the benefits of a young farmer taking a career pathway that develops not just their skill-set and experience, but also their equity before returning home? Does ignoring the opportunities outside the home farm actually limiting the potential returns from the dairy industry as a whole?

While the issue seems somewhat complex, my point is actually quite simple. Consider a young farmer who takes the plunge to invest all their savings into stock and minimal infrastructure in a leased milking block. Will he get a better return on his time than the young farmer who heads straight home to the family farm? The fact is that, on a return per euro invested, a leased farm will deliver a higher return than an farm, even if both operations deliver the same level of profit per hectare. The example below shows this clearly. An overall stocking rate of 2.5LU/ha is used, with each livestock unit costing €1,200. Infrastructure and set up costs are factored in at €800/ha on the leased block, and land value and capital investment are priced at €15,000/ha on the owned farm.

Assets

The example clearly shows that when you invest lower levels of capital in dairying, concentrating this investment into stock rather than fixed assets will always provide a higher level of return if done well.

Young farmers should give due consideration to structures such as the new sharemilking agreement launched recently by the Farm Managers Association along with Teagasc.

Those that also made use of the New Entrant Scheme in recent years should also evaluate their achievement, with the opportunity of farm leases and milk production partnerships offering other mechanisms for young farmers to progress in dairying.

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It should be noted that these farming structures are often associated with a higher level of risk and lower level of security than returning home.

But the young farmer is generally less risk adverse, and has a lower requirement for security and creature comforts compared to an aging couple with children. In my opinion, young people should take advantage of the ability to easily move around while they still have the opportunity.

Dairying is not a cash cow, but it does offer a great opportunity to grow equity.

The initial years when cash surpluses are poor are character building experiences that will stand you well in periods of volatility.

Understanding business growth and developing the ability to evaluate opportunities takes time and experience. Because of this, success may reward to brave before they've truly recognised what they have achieved.

Mary Kinston is a discussion group facilitator and consultant, and farms with her husband in Co Kerry

Indo Farming