Teagasc Dairy adviser Ger Courtney said the first thing a dairy farmer needs to do if he is considering expansion is to put a plan in place which shows he is efficient and can deliver a margin in his existing business and an expanded business.
A recent “future intentions” survey carried out in 2014 on Kerry Group suppliers showed 30% of farmers responded suggesting their cow numbers will remain unchanged from 2014 to 2017, 45% say they will increase less than 20%, and 25% of respondents claimed cow numbers on their farm will increase by over 20%.
Efficiency measures
Ger explained there is scope to get more from existing cows because he can see a difference of 62kg of milk solids per cow between the average Kerry supplier and the top 10% of Kerry suppliers, and also big differences in fertility between Kerry suppliers.
He valued herd maturity (older cows staying in the herd) which is worth €100 per cow in extra milk value.
In terms of cost of production on monitor farms, Ger said: “The cost is in the region of €1,350 per cow (25 c/litre).” Ger emphasised that the way to reduce that cost is by growing more and better-quality grass.
He said: “Growing 14 tonnes of grass is possible in Kerry. Better soil fertility, grazing infrastructure and reseeding has the potential to lift grass growth by 35%, which is worth €500 per hectare/year.”
He sent a clear warning that expansion will decrease efficiency and while expansion is an individual decision, a farm plan should be the centre of expansion to show how it can deliver improved profitability and better cashflow.
To demonstrate based on case studies, Ger used an example of eight Kerry farms that had increased milk supply from 2008 to 2013 by buying milk quota in the exchange. The extra revenue per farm came to €36,000. There were €27,300 in extra costs associated with producing 390,000 litres compared to 290,000 previously (about an extra 20 cows) resulting in an improved margin of €8,750 per farm, or an extra €100 per cow in the herd on average over the five years.
Pat Byrnes, agri development manager with Bank of Ireland, re-emphasised the importance of cashflow projections and a sound business plan.
He said: “Repayment capacity is the key lending consideration and while security is important, repayment capacity is number one. In September/October 2014, 13 farmers approached bank of Ireland looking for €5.4m in borrowings. Eight cases were related to dairy expansion but only two of the eight farmers had farm plans. That’s only 25%, and it must improve if farmers and bankers are to make better investment decisions.”
Global context
Former Kerry Group chief executive and keynote speaker Denis Brosnan explained that the extra milk Ireland is set to produce when quotas go equates to just over 500m gallons, which is a small figure in a global context.
He believes Ireland has the expertise and capability to sell the increased output. He said: “The world population continues to grow by approximately 70m per year, mainly in Asia, which is causing an increasing demand for dairy products.
“However, supply and demand seldom match, leading to constant price fluctuations. Prices were at historic highs in 2013, but a 4% increase in global output, lower Chinese demand and the Russian ban on EU imports are causing prices to drop significantly. In the longer term, demand will exceed supply, so when balance is restored prices will rise again.”
Sam Maguire in Tralee
A huge crowd turned out in Tralee at the regional Bank of Ireland Agri seminar to see and hear Eamonn Fitzmaurice with the Sam Maguire cup.
Fitzmaurice emphasised his preference to keep county GAA players as amateurs rather than professionals because they can develop careers outside of playing compared to young professional rugby players who more often than not are only starting a new career when rugby ends in or around 30 years of age.
More milk from a mature dairy herd has a value of €100 per cow. How to get this is better herd fertility.Better grass from improved soil fertility, reseeding and infrastructure is worth €500/ha.Previous Kerry expansion results show increasing numbers from 60 to 80 cows is worth about €100 per cow after all costs have been paid, but costs can be greater than the extra revenue unless there is tight cost control.
Teagasc Dairy adviser Ger Courtney said the first thing a dairy farmer needs to do if he is considering expansion is to put a plan in place which shows he is efficient and can deliver a margin in his existing business and an expanded business.
A recent “future intentions” survey carried out in 2014 on Kerry Group suppliers showed 30% of farmers responded suggesting their cow numbers will remain unchanged from 2014 to 2017, 45% say they will increase less than 20%, and 25% of respondents claimed cow numbers on their farm will increase by over 20%.
Efficiency measures
Ger explained there is scope to get more from existing cows because he can see a difference of 62kg of milk solids per cow between the average Kerry supplier and the top 10% of Kerry suppliers, and also big differences in fertility between Kerry suppliers.
He valued herd maturity (older cows staying in the herd) which is worth €100 per cow in extra milk value.
In terms of cost of production on monitor farms, Ger said: “The cost is in the region of €1,350 per cow (25 c/litre).” Ger emphasised that the way to reduce that cost is by growing more and better-quality grass.
He said: “Growing 14 tonnes of grass is possible in Kerry. Better soil fertility, grazing infrastructure and reseeding has the potential to lift grass growth by 35%, which is worth €500 per hectare/year.”
He sent a clear warning that expansion will decrease efficiency and while expansion is an individual decision, a farm plan should be the centre of expansion to show how it can deliver improved profitability and better cashflow.
To demonstrate based on case studies, Ger used an example of eight Kerry farms that had increased milk supply from 2008 to 2013 by buying milk quota in the exchange. The extra revenue per farm came to €36,000. There were €27,300 in extra costs associated with producing 390,000 litres compared to 290,000 previously (about an extra 20 cows) resulting in an improved margin of €8,750 per farm, or an extra €100 per cow in the herd on average over the five years.
Pat Byrnes, agri development manager with Bank of Ireland, re-emphasised the importance of cashflow projections and a sound business plan.
He said: “Repayment capacity is the key lending consideration and while security is important, repayment capacity is number one. In September/October 2014, 13 farmers approached bank of Ireland looking for €5.4m in borrowings. Eight cases were related to dairy expansion but only two of the eight farmers had farm plans. That’s only 25%, and it must improve if farmers and bankers are to make better investment decisions.”
Global context
Former Kerry Group chief executive and keynote speaker Denis Brosnan explained that the extra milk Ireland is set to produce when quotas go equates to just over 500m gallons, which is a small figure in a global context.
He believes Ireland has the expertise and capability to sell the increased output. He said: “The world population continues to grow by approximately 70m per year, mainly in Asia, which is causing an increasing demand for dairy products.
“However, supply and demand seldom match, leading to constant price fluctuations. Prices were at historic highs in 2013, but a 4% increase in global output, lower Chinese demand and the Russian ban on EU imports are causing prices to drop significantly. In the longer term, demand will exceed supply, so when balance is restored prices will rise again.”
Sam Maguire in Tralee
A huge crowd turned out in Tralee at the regional Bank of Ireland Agri seminar to see and hear Eamonn Fitzmaurice with the Sam Maguire cup.
Fitzmaurice emphasised his preference to keep county GAA players as amateurs rather than professionals because they can develop careers outside of playing compared to young professional rugby players who more often than not are only starting a new career when rugby ends in or around 30 years of age.
More milk from a mature dairy herd has a value of €100 per cow. How to get this is better herd fertility.Better grass from improved soil fertility, reseeding and infrastructure is worth €500/ha.Previous Kerry expansion results show increasing numbers from 60 to 80 cows is worth about €100 per cow after all costs have been paid, but costs can be greater than the extra revenue unless there is tight cost control. 
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