Farm Ireland

Wednesday 18 July 2018

Viewpoint: 2015 the year of the suckler?

EU Agriculture Commissioner Phil Hogan
EU Agriculture Commissioner Phil Hogan
Darragh McCullough

Darragh McCullough

Could this be the year that the suckler cow leaves more behind her than the dairy cow?

This was the question thrown at me by a farm leader recently - half joking, but still all in earnest.

It seems hard to countenance. After all, if a suckler man clears €250/ha before adding in his EU payments, he's probably doing a good job. The equivalent dairy farmer is likely to be aiming for 10 times that.

So can the scales really tilt so far, so quick?

A big part of the equation is the massive volatility that milk prices now find themselves subjected to. In 2014, milkmen were still enjoying some of the strongest prices ever - when milk solids were included, many were receiving well over 40c/l. The Shinagh demonstration farm in west Cork averaged 46c/l for the whole of last year.

Fast forward to June when Glanbia's basic milk price was cut further to 26c/l. The harsh reality is that most dairy analysts believe that this doesn't represent the bottom.

In New Zealand the price has tentatively been set at 23c/l, but farmers there believe that Fonterra leaders may have been too optimistic as they tried to soften the bad news ahead of board elections.

Incredibly, despite their absence from the market for over a year, the Chinese appear to still have stocks to clear. Worse, their domestic production has climbed by 6pc this year.

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US farmers, buoyed by protected domestic markets that are returning 36c/l, are continuing to pump out milk, and EU production is also up this year, even with a June dip following heatwaves in Germany, France and Italy.

Political pressure will continue to mount on Commissioner Hogan's office to increase intervention prices, but this isn't going to fix the supply-demand imbalance that is piling this unrelenting downward pressure on prices.

If milk price gets to 24c/l, many Irish farmers will be facing a break-even situation. That's when the suckler cow starts to pull ahead. It doesn't take a lot of profit to beat none.

But dairy farmers shouldn't get too down-hearted about this. Instead, they should take a leaf out of the pig-farmer's handbook - they've been dealing with this see-saw price scenario for decades. You just need to be prepared for it.

While the French and Belgians burn tyres and block motorways demanding 36c/l for their milk, Irish farmers can take a lot of comfort from the fact that they will make a decent wage out of a milk price up to 20pc lower than this. That's the reason to back the Irish dairy industry.

When the good times come again, the rewards can be fantastic. Again, looking at the Shinagh demo herd in Cork, the profitability figures for the last two years show a return on equity of 50pc. 2015 might be the year of the suckler, but it's hard for any farm enterprise to compete with dairying 's returns over the long-term.

Indo Farming