Facts and figures: How much does it really cost to switch to dairy farming
A minimum milk price of 32c/l and a 70-cow herd are essential in the initial phase of a dairy start-up, writes Martin O'Sullivan
In my article about dairy robots of two weeks ago I referred to the cost of establishing a 65-70 cow dairy enterprise.
To my surprise I received a deluge of queries, not necessarily about robots, but about the viability of establishing a 60-70 cow enterprise.
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All of the enquiries were from beef farmers who were considering a dairy start-up which would provide them with an acceptable return that would enable them to work full-time on the farm.
With this in mind, I decided to analyse the figures to see if a 70-cow enterprise would represent a viable unit.
The farmer who intends to convert to dairying is a 45 suckler cow beef farmer who sells the progeny at a year and a half. I will make the following assumptions:
- There are 100 owned acres and €60,000 in total farm debt, mainly comprising a stocking loan that is cleared and renewed each year when the cattle are sold.
- The current Basic Payment is €15,000 per year.
- The existing stock of cows and weanlings will realise €72,000.
- Dairy cows/in-calf heifers will cost €1,600 on average.
- The enterprise will be based on 70 cows from the outset producing 315,000L in year 1, rising to 385,000L in year five based on standard fat and protein.
- The projected price per litre is 32c, which is the maximum price that banks will currently run with.
- Existing cattle housing can be modified to accommodate 70 cows and replacements.
- Silage harvesting will be done by contractor.
- It is assumed that the labour requirement is met mainly by the farmer with occasional farm relief.
- A new parlour will be erected and a second hand 12-unit milking machine installed along with a second hand bulk tank.
- No grant assistance will be available.
- Total borrowings at commencement will amount to €198,800 (see table 1) which will be repaid on a fifteen-year term.
- Annual drawings from the farm are €30,000.
- There will be capital allowances of €24,000 per year for the first seven years on the initial capital spend on buildings. This will mean that the only tax payable in the first two years will be the minimum rate of PRSI.
Table 1 sets out the breakdown of capital expenditure and resultant borrowing requirement.