Farm Ireland
Independent.ie

Tuesday 23 January 2018

Opinion: Why big is not always beautiful for the 300-cow man

UCD's new state-of-the-art 40-unit rotary parlour was part of a €2m investment in new facilities on its Lyons farm this year
UCD's new state-of-the-art 40-unit rotary parlour was part of a €2m investment in new facilities on its Lyons farm this year

Mike Brady

The average dairy farmer in Ireland today milks a herd of 80 cows. However, there are a handful of dairy farmers who have now broken the 1,000-cow barrier. Is this the way Irish dairy farming will continue: bigger and better?

Entrepreneurs are bred to grow and expand businesses. The adrenaline rush of being the biggest and the best drives business owners all over the world out of bed every day. Dairy farmers are no different.

Not everybody wants to expand, but after over 30 years of stagnation caused by EU milk quotas, there are more expanding dairy farm businesses than any other farm enterprise in this country.

You have to question where it will all end.

The New Zealanders went from an average herd size of 124 cows per herd in 1979 to 419 cows in 2015.

Only time will tell whether we will follow the same path.

Fragmentation and small holding size are big chal- lenges but some have overcome them already. So, are these dairy farmers millionaires or are they burdened by bank debt and never- ending lists of problems?

Last year was a poor year for milk prices and the resolve of all dairy farmers was severely tested.

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Agricultural consultant, Mike Brady.
Agricultural consultant, Mike Brady.

But a small-scale expansion of milking, by adding an extra line or two of cows in the existing milking parlour, enabled dairy farmers to counter the fall in profits, as the extra cows put an additional €500 per cow into under-pressure bank accounts.

Therefore an 80-cow dairy farmer who milked 100 cows in 2015 had an extra €10,000 of net profit at 25c/l - this assumes he employed no extra labour and rented no extra land.

This was the case for many dairy farmers, where their dairy cow numbers increased but the number of replacement heifers or beef cattle reduced; therefore, the farm stocking rate remained the same.

What about those who have grown at a faster rate? A 50-cow herd keeping all replacement heifers at a 20pc replacement rate can only grow to 60 cows in year one of an expansion plan.

A 500-cow dairy farmer with the same performance will grow to 600 cows in year one or he will produce a new herd of 100 cows per annum.

Such farmers often remark that getting to the first 100 cows is the hardest; the growth thereafter is rapid.

Quotas

These larger dairy farmers generally are those who had large milk quotas in 1983 and/or were located in an area where an additional milk quota was readily available.

A typical growth curve for these dairy farmers, who started with approximately 100 cows in 1983, was to increase the herd by leasing land and milk quota in the 1980s and 1990s - they grew up to 180-200 cows by 1999 - then it all stopped as milk-quota leasing with land ceased.

This lack of quota leasing stopped expansion in the period from 2000-2007. The Celtic Tiger distracted many until the announcement in 2007 that milk quotas were going in 2015.

New farm building grants, the Farm Waste Management Scheme, Farm Improvement Scheme and Dairy Improvement Scheme commenced in 2007/2008, marking the start of the new expansion phase.

Some experimented with going over quota in 2008, 2009 and 2010, but the horns were pulled back as the superlevy became a reality. Most limped along until the shackles came off on April 1, 2015.

Some of these farmers had now grown to 300-plus cows, by renting additional land onto the grazing block and investing heavily in livestock, roadways, paddock fencing, housing, slurry storage and milking parlours. Then came 2016!

The milk-price collapse last year caused some of these farmers to hit what I call 'The 300-Cow Wall' - that day when one questions what it is all for and whether it was the wrong decision to expand.

The causes for this temporary meltdown were:

No cash due to the low milk price;

Lack of management experience and being dependent on employed labour;

No exciting new development/expansion/building projects to energise the spirit.

In the past, at 180-200 cows, an employee leaving was not that big of an issue. Everybody in the family just worked a bit harder until a replacement was found.

But in a 300-plus-cow dairy herd, there are not enough hours in the day for the farmer and his family to run the show ­- employed labour is a must.

This, for many, was a harsh lesson that 'big is not always beautiful' in the new reality of dairy herd expansion.

We are now one month into 2017; farm business plans are projecting cash surpluses. Will the expansion bug kick off again?

Somehow, I believe those who experienced 'The 300-Cow Wall' will be a little more cautious this time around.

Michael Brady is an agricultural consultant based in Co Cork Email: mike@bradygroup.ie


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