Sunday 25 September 2016

Gap between dairy and beef incomes has started to narrow

Thia Hennessy and Brian Moran

Published 24/06/2015 | 02:30

The difference in the average income earned by dairy farms versus cattle finishing farms attracted the most attention in the annual Teagasc National Farm Survey.

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The average income on specialist dairy farms reached the unprecedented level of €68,877 while the average on cattle finishing farms was €13,834.

With the removal of the milk quota many are asking, if dairy farming is so much more profitable than beef then will we see all our cattle farms convert to dairy?

It is true that on average dairy farms are more profitable than cattle but there are significant differences between the two sectors that need to be considered.

Labour intensive

There are approximately 16,000 specialist dairy farms and over 40,000 cattle farms in the survey.

For the most part the dairy farms are a homogenous group made up of larger, full-time farms with almost 85pc of them farming 30ha or more. Almost 40pc of cattle finishing farmers operate a holding of 30ha or less.

Dairying is more labour intensive, rewarding around one and a half family labour units, compared to just one person on the average cattle farm. Around 37pc of cattle farmers have an off farm job, something almost unheard of on a dairy farm. Debt is also lower at around €10,500 on cattle finishing farms.

The income gap narrows somewhat when labour, farm size and capital requirements are taken into account.

Prices

Farming is a volatile business. 2014 was a good year for dairy farms and a bad one for cattle. Although milk prices were falling, they were coming from a very high point and production was ramping up for quota removal. For cattle farms the average annual finished price was down 12pc on the previous year.

This widened the gap between the sectors but we are likely to see a reversal of fortunes this year and probably a narrowing of the gap again. Cattle prices are more than 10pc ahead of where they were this time last year and milk prices are more than 25pc behind.

Conversion

Conversion from cattle to dairy is unlikely to happen on a grand scale, at least in the short term. A survey showed just 1pc was interested in converting to dairy farming over the next two years.

For many cattle farmers the scale of their farm business, their stage of life and the considerable investment required to start up a dairy operation are all inhibiting factors.

Farm partnership arrangements and/or long-term leasing agreements are the more likely channels through which land that is currently used for cattle production is likely to move into dairying.

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