Dutch approach to dairy comes with big risks attached
A group of Limerick dairy farmers recently made the short trip to Holland to see what could be learnt from our European counterparts. They appear to well ahead of us in terms of herd health but it is the level of on farm debt that would have you worried about the long term viability of the Dutch dairy industry as a whole.
'God made the world and the Dutch made Holland' is a well known statement in Holland and a short drive into the countryside and you understand where this statement arises from.
Around 40pc of the land in Holland is below sea level and is extremely flat. There only a few inches of soil on top of a sandy subsoil with a very high water table which leaves the land saturated for half the year.
This is the reason why Holland's indoor system has evolved to what it is today. Typically cows are confined for eight months plus of the year, with some allowing cows out to graze for 130 days to attain a 1c/l milk price bonus.
On the farms we visited, the diet consisted of primarily of good quality grass silage supplemented with approximately 2.5t/cow of concentrate annually.
On these farms cow yields were impressive, ranging from 7,500l/cow to 10,500l (700- 800kgs milk solids/cow). Nationally the Dutch yield per cow is nearer to 6,500l.
The most striking feature on all the farms we visited is the level of investment in housing and milking facilities and the associated debt.
Huge 'barns' dotted the countryside as we drove along the motorway.
These sheds are built to house all animals on farm, with milking cows, dry cows, replacements and calves all housed under the one roof along with the milking facilities, which were robots on 75pc of the farms we visited.
These 'barns' are extremely impressive structures, designed with ultimate cow comfort in mind at all times. However, they do come with an equally impressive price tag.
Borrowings of €10,000- €20,000/cow appear to be the norm in Holland.
The Dutch banks seem to be making finance very easily accessible to the farming community and with interest rates of approximately 2.5pc, these farmers are accepting all the cash being offered to them.
Repayment terms seemed to be quite loose and the system seems to be that you pay off more in the good milk price year and less in the bad year.
However, even if milk price was to remain 40c/l, it is hard to see this level of debt being paid off anytime soon, and it won't be, as typically, the loans are intergenerational.
While it appeared that repayment terms were quite loose, the banks were still putting pressure on to get their money back.
Many farmers were selling houses, sites and outside blocks of land to service the debt.
It was difficult to get an accurate picture of the costs of production, but it seemed to be around 25-30c/l, excluding own labour and loan repayments.
When you factored these in, then Dutch farmers need to be making somewhere in the region of 40-50c/l to cover all costs, and to pay themselves and the bank. They are currently receiving a base price of 30c/l, with the Basic Payment, culls and calves probably adding another few cents to this. From these figures it easy to see that at current milk prices the sums are not adding up.
Where the Dutch farmers do have the upper hand on us is in terms of herd health.
They have eradication schemes for IBR and salmonella in place for almost 20 years and the majority of farms are now free from these two diseases.
While they are voluntary schemes, it can be difficult to sell milk and cows without certification.
They are currently embarking on a BVD eradication scheme.
All schemes are based on bulk milk tank tests. Another interesting rule is that Dutch farmers can only use antibiotic dry cow tubes on 10pc of their herd at drying off.
Stocking rates are typically 2LU/ha, but when you take into account that a cow in Holland produces 125kgs of organic nitrogen compared to our 85kgs, then their 2LU/ha is the same as our 3LU/ha.
Phosphates in water are a big issue at present and the Dutch government are bringing in a new quota type system based on stock numbers.
Dutch farmers will have to purchase 'slurry rights' if they wish to exceed their stock numbers based on a reference year which looks likely to be 2014.
The farmers we spoke to estimate the cost of these slurry rights would be in the region of €5,000/cow which could make it unrealistic to purchase.
So it appears Dutch dairy farmers are running out of land, and coupled with the massive debt levels, it is difficult to see where they can go from here.
Joe Kelleher is a Teagasc dairy advisor in Newcastle West, Co Limerick.
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