Is a 50-cow dairy start-up a better bet than a loss-making drystock farm?
I recently received a phone call from a young farmer looking at the option of converting from drystock farming into dairying. However, he only had 40ac around the yard and he wasn't sure if he had sufficient scale for the project to be financially viable.
I arranged to call out to the farmer's place later in the week to assess the land quality, facilities and to complete a five-year business plan to assess how realistic his ambition was. The land quality was good, free-draining soil and while old permanent pasture dominated, all fields contained reasonable levels of ryegrass and little weeds.
There were little or no farm roadways present. There was a beef slatted shed alongside an old cubicle house which could have been upgraded easily to accommodate 30 cows. A new milking parlour and dairy were required.
The farmer's main motivation for converting to dairying was that his current system of farming was not delivering a profit. His system of farming at present involves purchasing weanlings and carrying them through to fattening. He also works off farm.
We completed a business plan at the kitchen table and after much discussion we decided that a gradual increase in stock numbers was probably the most prudent way to approach the conversion.
This way the debt levels could be kept relatively low. It was decided that he should purchase 30 cows to start with and we budgeted €45,000 to do this.
The construction of the parlour, dairy, purchase of a second hand 10-unit machine and second hand bulk tank were all costed and he is confident that he can complete all works for a further €45,000.
This left the farmer with an initial start-up cost of €90,000, all of which has to be borrowed.