Farm Ireland

Tuesday 23 January 2018

Expansion costs work out at €4,000 per cow or 4c/l of milk production

Darrragh McCullough

I visited a Meath dairy farmer recently to see first-hand the challenge that is involved in expansion, and the true extent of the costs involved.

The 130 winter-milk cow herd has increased to 200 cows over the last three years. No land was bought, but an additional 137ac of land was leased on a long-term lease. Leasing costs come in around €290/ac.

The farm is a no-frills operation, with costs at 23c/l plus 3c/l for depreciation. However, the price of expansion shoves another 4c/l on to the overall cost. Here's how the items added up.

While the land is good farmland, it needed liming, reseeding and some drainage work to maximise its grass production. This came to €60,000, before fencing, water-troughs or roadways were included.

About €15,000 was spent on roadways, while fencing cost another €16,000. Water-troughs and piping came to €10,000.

Water itself was one of the biggest expenses encountered during the whole process. Only two years ago a 420ft well was drilled to access more water after the farm's original 120ft well dried up during the previous 2011-2012 season. Drilling and lining the new well cost €11,000, and because the water has so much iron in the area, the €500 pump had to be replaced every three to four months.

However, despite having a water requirement of 1,000 gallons per hour to maintain the 200 cow herd, the new well is only providing a maximum flow of 270 gallons per hour.

As a result, the farmer has now resorted to extracting water from a local river to top-up his supplies.

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The cost of the 1km of piping, a 5,000-litre header tank, filtration systems to get the river water up to standard for use in his milking parlour came to a total of €17,000.


In addition to upgrading his water supply, this farmer realised that he needed to redo his electric wiring to cope with the increased demands of the system.

"We kept on blowing up the fuse board when we had everything on at the same time," he said. "Sometimes it was just unavoidable. The 20-unit parlour would be on, the compressor and the agitator in the milk tank would be going, scrapers, water pump, lights and then someone would turn on a kettle in the house and the whole thing would calve.

"I tried everything, like building up a big block of ice in the milk overnight, so I could leave the cooling system off when we were milking, but gradually I realised that there was no way around getting a three-phase supply.

"To be honest, I was lucky. It ended up costing me €4,000, when I've heard of other places where they ended up paying nearly €30,000 to get it in.

"But that wasn't the end of it. While I was at that job, I decided to tackle the wiring in the place which was becoming dangerous. But that alone ran into another €12,000."

The expansion spend doesn't end there. Despite being locked up with TB, and stock numbers ballooning from 340 to 450 head, this farmer still needed to buy 45 cows at a cost of €50,000 during the expansion process.

The extra cows also require extra facilities, with extra accommodation at a cost of €40,000 and a €17,000 silage pit extension all adding to the bottom line.

In total, the outlay was €292,000, or just over €4,000 for every additional cow. At 6pc interest, that comes to an annual outlay of €300/cow, which in this case is another 4c/l in production cost, despite a zero-spend on machinery.

These numbers overlook the massive amounts of extra work that is involved during any expansion phase, the strain on cashflow that spending inevitably brings, and the small detail that can rack up another couple of thousand euro.

For example, complying with water quality criteria involved the installation of a five-stage filtration system in this case involving settlement tanks, and salt and ultra-violet treatment systems. Throughout the transition, farms rarely comply with farm safety guidelines in terms of adequate penning and handling facilities. The effort and time involved usually takes a toll on record keeping too.

In this regard, complying with nitrates in terms of slurry exports and stocking rates can become a very tricky area, and one that farmers often end up getting extra professional advice on.

Indo Farming