Faraway fields can really be greener for young farmers
As this year's dairy season gets underway, it is haunted by the prospect of rock-bottom prices . But in the longer term most agree that dairying will still deliver good profits and an agreeable standard of living.
Therefore it is no surprise that the numbers of young farmers studying agriculture has risen substantially in recent years. However, is the induction of young family members directly into the family farming business after college the right career step? Working the home farm often seems the obvious move for a young dairy farmer after third level. It's also no surprise that the Land Mobility brokerage service have more enquiries from farmers looking for young farmers than from young farmers themselves wanting farms.
However, should dairy industry bodies and farmers themselves not promote the benefits of a young farmer taking a career pathway that develops not just their skill-set and experience, but also their equity before returning home? Does ignoring the opportunities outside the home farm actually limiting the potential returns from the dairy industry as a whole?
While the issue seems somewhat complex, my point is actually quite simple. Consider a young farmer who takes the plunge to invest all their savings into stock and minimal infrastructure in a leased milking block. Will he get a better return on his time than the young farmer who heads straight home to the family farm? The fact is that, on a return per euro invested, a leased farm will deliver a higher return than an farm, even if both operations deliver the same level of profit per hectare. The example below shows this clearly. An overall stocking rate of 2.5LU/ha is used, with each livestock unit costing €1,200. Infrastructure and set up costs are factored in at €800/ha on the leased block, and land value and capital investment are priced at €15,000/ha on the owned farm.
The example clearly shows that when you invest lower levels of capital in dairying, concentrating this investment into stock rather than fixed assets will always provide a higher level of return if done well.
Young farmers should give due consideration to structures such as the new sharemilking agreement launched recently by the Farm Managers Association along with Teagasc.
Those that also made use of the New Entrant Scheme in recent years should also evaluate their achievement, with the opportunity of farm leases and milk production partnerships offering other mechanisms for young farmers to progress in dairying.