'Heavy soil farmers may have to work more land, but return on assets is high'
A new study has found that efficient dairy farms operating on poorly drained soils can be as profitable as those on drier land.
In a recently published paper, researchers in Teagasc examined physical and financial performance data of farmers in its Heavy Soils Programme (HSP) over a six-year period, benchmarking their performance against a nationally representative data set of dairy farmers from the National Farm Survey (NFS).
The programme which began in 2010 aimed to improve the profitability of grassland farms on heavy soils through the adoption of key technologies such as appropriate drainage solutions and high-quality pasture management.
The analysis indicated that higher average farm incomes and comparatively high returns on assets can be achieved on challenging soil types in locations of high rainfall, through high levels of technical management efficiency focusing on a grass-based system of milk production.
Liam Hanrahan of Teagasc said the results from the programme have been very positive and added that "it just goes to show that the top 10pc farmers can be found in any part of the country".
Their success is achieved through utilising large quantities of grass and efficiently converting this to milk, combined with stringent cost control.
The economic analysis indicated that the HSP farmers achieved significantly lower net profits per hectare to the NFS median group, but significantly higher net profits per kg of fat and protein.
The HSP farms also achieved a significantly greater overall net farm income per year (€83,788), when compared to the median nationally (€67,898), over the six-year period (excluding owned land and labour).
The mean return on assets ascertained by the HSP farmers was also significantly greater, at 5.75pc per year compared to 3.49pc achieved by the median of NFS farms.
"While farmers in the programme are not more profitable on a per ha basis, they are more profitable per kg of milk solids," says Hanrahan.
"Heavy soils farmers may have to work more land to get the same output as farmers on drier ground, but the data shows that the return on assets is very high."
The variation in physical performance across farm categories is most notable in the differences in stocking rate at farm level, with this having a large influence on other measurements such as milk production per ha. Although HSP farms had the lowest stocking rates of all farm categories, they are utilising greater quantities of grass DM per ha than the NFS median group of farms combined with lower levels of purchased feed.
Due to the nature of heavy soils, there are risks and costs associated with adverse weather events, such as the requirement for extra silage reserves, which are a factor of the lower stocking rates observed at farm level.
The researchers said that it can be inferred from the data that higher stocking rates do not necessarily result in increased profitability.
This confirms previous research which suggests that the ability to convert grazed grass into milk efficiently is the key driver of profit in pasture-based systems.
While the HSP farms had lower net profit per ha, their mean annual net farm income was significantly greater than the NFS median farms, combined with relatively high return on assets, when compared across farm categories at a range of investment levels.
The researchers concluded that this indicates that with a greater level of management there is scope for farmers on inferior quality soil types to achieve high overall financial performances and similar return on investments to that typical of free draining soil types when operated at high levels of grazing efficiency and maximising output at low cost.
The research also highlighted that more efficient farms experienced lesser fluctuations in net profits proportionately across years, resulting in these farms being able to deal with the low milk price years and capitalise on the high milk price years to a greater extent.
In the case of the HSP farms, land tends to be more available to either rent or purchase which is reflective of the land market value of these areas and also the larger overall size of the HSP farms compared to all other farm categories.
In contrast, the highest performing farms nationally, in terms of profitability per ha, tend to have smaller farm sizes due to reduced land availability.
The researchers also said that their work shows that there is considerable scope for expansion on the NFS median and bottom 20pc farms and HSP farms through greater infrastructural investments to increase stock carrying capacities.
However, they stressed that in an Irish context, such increases in output must coincide with increases in grass utilisation to remain sustainable long term.
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