Farm Ireland
Independent.ie

Sunday 20 January 2019

2018 weather cost dairy farmers 6c/L - how to get your farm finances ready for any challenge

Claire Fox

Claire Fox

Dairy farmers need to prepare now and can’t assume that an extreme weather year like 2018 won’t happen again, Head of Agriculture at AIB Tadgh Buckley has warned.

Speaking ahead of the Positive Farmers Conference due to take place in Cork next week, Mr Buckley advised that dairy farmers must make preparations to ensure their farm is weather and financed proof in the event that an extreme weather year like 2018 happens again.

“The 2018 milk production year will be remembered as one of the most challenging in recent years for Irish dairy farmers. While 2018 was an exceptional year it would be foolhardy to categorise it as a once-off event that will not re-occur,” Mr Buckley pointed out.

"Dairy farm net margins in 2018 are likely to be similar to 2016 despite a 5c/L higher milk price. The financial impact of the difficult weather conditions is quite variable ranging from 2c/L in the least impacted regions to c. 6c/L on farms worst affected.

“In any event, addressing the challenges that 2018 presented on your farm will better position your farm for the future and make it a more sustainable business going forward for all involved in the business.”

Mr Buckley highlighted some key issues that should be addressed on farms to make sure farmers are ready for all possibilities when it comes to the weather in 2019.

Contingency funds are invaluable

Mr Buckley said that dairy farms, where access to feed and financial reserves were readily available, coped much better with the difficulties of 2018.

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He advised that farmers need to make sure that both financial and fodder reserves are put in place to better insulate themselves in case another weather event such as Storm Emma occurs.

“A good rule of thumb is to ensure your business has access to a minimum of 6 months financial repayments at all times. Farms with a high level of borrowing (greater than €4,500/cow) should consider having access to 12 months repayments,” he explained.

Inadequate facilities exacerbate stress on all aspects of your business

Farms with inadequate facilities for the size of their operation were the most affected in 2018, Mr Buckley said. This also includes farmers who had inadequate finances.

He warned: “Infrastructure that allowed all cows to be buffer-fed together reduced labour and simplified processes. Long-term investments being placed on a short-term repayment schedule or working capital facilities being used to fund capital expenditure in prior years thus impacting the level of capital available to the business going forward.”

He encouraged farmers to invest in infrastructure such as additional feed space which is generally inexpensive, particularly when analysed over the expected lifetime of the investment.

“A useful guide is to divide the total investment by 10 which gives a reasonable approximation of what that investment would cost annually if borrowed over a 15-year period.”

Calculate your optimum stocking rate based on multi-year whole farm assessment

Mr Buckley stated that a farm with an overall stocking rate of 2.5 livestock units per hectare (LU/Ha) is required to grow 15t/ha to avoid the requirement to purchase additional forage (assuming 500kgs of concentrate fed per cow).

However, he said while there are some farmers growing 15t/ha on their milking platform, many are growing far less on their outside support blocks (often not even grass measured).

“Farmers most heavily impacted in 2018 were those whose total grass production was substantially below the levels required to support their overall farm stocking rate, even in a ‘normal’ year.

“The optimum farm stocking rate may well be below what is most profitable in a favourable year like 2017 but will allow for a build-up of fodder and will also better insulate the farming operation against a weather event similar to 2018,” he explained.

Beware of risk of system creep

The level of meal and supplement feeding evident on dairy farms in 2018 far exceeded levels of previous years. In many cases, this supplementation led to a strong milk production response.

However, Mr Buckley urged farmers to remain focused on the core objective of grass-based milk production and avoid the temptation to continue supplementation at 2018 levels. Ensuring your farm is operating at an appropriate stocking rate significantly reduces this risk.

  • The Positive Farmers Conference will take place in the Radisson Blu Hotel, Little Island Cork on January 16 and 17.

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