Finding a fix for milk price volatility
The Teagasc Greenfield dairy farm in Kilkenny is taking a three-pronged approach to dealing with turbulence in the milk markets
Fixed price milk schemes have proved a valuable tool in helping the large-scale Teagasc Greenfield enterprise to negotiate through the latest milk price downturn.
The dairy project is nearly halfway through its 15 year plan, which saw the three shareholders - Glanbia, Phelan family and Agricultural Trust - invest in the €750,000 conversion of the former tillage farm to a dairy enterprise.
Volatility management has raised its head for dairy farmers in 2015 and 2016. But it is something the Greenfield farm has been coping with since the outset as it was a high cost farm, explained Teagasc's Dr Laurence Shalloo about the enterprise currently milking 334 cows on the outskirts of Kilkenny.
"We are a very high cost farm with a lot of fixed costs. We've a full land lease, full labour and full bank commitments to make," he said, adding the cost of production in 2015 was 37c/l.
On the farm the team has three strategies to manage volatility - reduce the breakeven price, fix milk price where possible, and put away cash in a good year.
However, he said many of these needed to be planned in advance. "Our net receipts are actually up because we fixed price," Dr Shalloo explained to the 1,000 farmers attending the opening day.
Since 2011, bar one year, they opted to fix around a quarter of their milk through the Glanbia fixed milk price schemes.
In 2011, fixing cost the farm €4,000. They gained €5,000 or 0.3c/l in 2012, while it cost the farm around €12,000 in 2013 and again it cost €3,000 in 2014. However, from 2015 they began gain substantially, with 1c/l gained to the tune of €15,000, and the farm is projecting a gain of around 1.8-1.85c/l for 2016.