For some farms, the lack of profitability in suckling means that the business is reliant on Single Farm Payment or another income source to cover the costs of production. Before getting out of suckling in 2011, Robin Clements was using his silage contracting business to subsidise his 70-cow herd.
With the income from silage contracting being heavily eroded by his suckler cows, he decided something had to change. As the land type is heavy, the farm is best suited to grass and livestock production. Robin had been considering a change to dairying for some time and, in September 2010, he purchased 52 maiden heifers for breeding that winter.
In September 2011, the farm started to produce milk with 80 cows in production in year one. The suckler herd, which was breeding Simmental and Limousin cross calves for the store trade, was dispersed through a number of special sales.
For Robin, the move to milk required plenty of planning. “You cannot simply flick a switch and move from suckling to milking. If you are not good at managing suckler cows, you will not be good at managing dairy cows. There is a lot to learn about milking cows. My discussion group has been a massive help in providing me with advice over the past few years,” states Robin.
Setting up
The sale of the suckler herd was used to finance the purchase of the dairy heifers. It is the investment in buildings where working capital can quickly become a limiting factor. Sheds were altered and extended to suit milk cows with 80 cubicles installed.
An additional slurry tank was constructed and feed passages were changed to suit using a diet feeder. The total cost of the changes made to livestock housing was approximately £120,000 (€151,600).
A secondhand (eight-unit double-up) milking parlour was purchased for £9,000 (€11,400) in the Republic of Ireland. It was one year old when purchased. The total cost of buying and installing the parlour, including a 6,000-litre bulk tank, was close to £40,000 (€50,500).
The reason for installing the secondhand parlour was simple. Robin had considered a robot system but, at a cost of £120,000 before adding in the cost of building sheds, it would have placed a severe debt burden on the farm. In Robin’s opinion, this would have left the breakeven cost of production too high. He would be no better off than when he was in suckling.
He is also a grassland enthusiast and prefers to have the cows milking off grass. As his grazing block is divided by public roads, grazing would be impossible with a robot system. A system of roadways within the grazing area were built at a low cost after digging up rock on the farm. Cows are milked twice a day with the whole process finished in 90 minutes.
A major asset on the farm is family labour. Robin’s wife, Heather, and sons Matthew (16) and Stephen (19) are heavily involved in the daily running of the farm.
Cow type
The herd has now expanded to 120 cows this year and rather than focusing on high-output Holstein cows, Robin decided to focus on a smaller cow yielding 7,000 litres on a grass-based system. Meal use has been higher than he would have liked at 2.5t/head in the past year, but the herd is young and yields are increasing. The target is to get meal back to 2t/cow while maintaining yields.
There are a number of crossbred cows in the herd, which is helping drive milk solids. This is an area that Robin sees becoming more important in the future. Cows are producing 3.37% protein and 4.07% butterfat and averaging 6,980 litres in the past year. Milk is supplied to Lakeland Dairies.
The aim is to produce all future replacements from within the herd, with high EBI bulls used over the top cows as identified from monthly milk recording.
Cows are bred using AI, with inseminations done by Robin. A Hereford bull acts as a sweeper. Surplus calves are sold off farm to repeat customers.
The herd is mostly autumn calving, with the aim to keep a tight calving pattern in future years. Around 90% of cows calve from September to December. This has meant that milk from forage is difficult to increase, with the herd averaging 1,344 litres from forage.
While it is a figure close to the benchmarked average, the target in the coming years is to increase this through making better silage, earlier grazing in spring and reseeding of old swards. Moving to spring calving has been considered, but it is unlikely to be pursued.
Cost of production
Last year, breakeven costs were 26p/litre (32.8c/l). Concentrate accounts for 8p/litre (10.1c/l) with grass at 2p/litre (2.5c/l). While concentrate use can be reduced, Robin maintains it is unlikely that the breakeven cost of production can be significantly lowered from its present level. The herd is benchmarked through
CAFRE. Robin maintains it is an exercise that more farmers should be doing.
Lessons learned
For Robin, the big benefit from milking cows is the steady cash income on a monthly basis. In suckling, he had two periods every year when cattle would be sold, which left cashflow under pressure.
Having a sound business plan was important when applying for bank loans. Robin worked with Cormac McKervey of Ulster Bank at the outset to plan the level of investment required.
Milking cows has represented a significant change in lifestyle. Robin is now tied to the farm, although he likes the routine of milking. The fact that he is being financially rewarded for his work makes it easier to do. Having family labour is also a help.
For anyone considering changing to milk, Robin would advise them to join a discussion group even before they start milking. It is a good opportunity to learn how to graze, feed and manage cows. Grassland management is vital and it is an area where many suckler producers are extremely weak. Soil fertility and reseeding are crucial.
The fact that Robin owns his own land helps. If he was predominantly on rented ground, he would not have gone into milk unless he had a long-term lease on the farm. The set-up costs are just too high to be operating on an annual conacre basis.
70-cow suckler herd changed to dairying in 2011.120 cows in milk.80ha grassland farm.Stocking rate: 1.76 LU/ha.Average yield: 6,980 litres from 2.5t/cow of concentrates.1,344 litre of milk from forage.I was with a discussion group in Clare this week and we spoke about some of the host farmer’s options in terms of the capital investment he required on his farm. The farmer owns 30ha but he is also leasing 30ha on a short-term basis. The cows can walk through the whole lot. He is milking 80 cows in an eight-unit milking parlour but needs to improve cow flow, reduce milking time and invest in more winter housing.
The discussion group split into three sub-groups and the chairman asked each group to justify, but also highlight, the risks of investing in the farm. The first sub-group was not allowed to borrow any money, the second could borrow €100,000 and the third €200,000. Below, I have summarised some conclusions from farmer discussions on the day.
Group 1
Sub-group that was
allowed zero borrowing
This group justified no spend because the industry is entering a potentially volatile period in milk price and overstretching the business could leave it vulnerable. The farm needs €60,000 per year for drawings, tax and borrowing repayments, so investing on farm at current stock numbers will not create more income in the short-term without a plan for growing output. This is assuming a profit of €700 per cow from the spring-calving herd. The group advised investing small amounts from cashflow, if there is a surplus, and to reassess the position after two to three years when there will be a clearer picture of what the future holds. The risk to not investing is that there will be plenty of hard work – a small parlour with poor cow flow and different wintering yards.
Group 2
Sub-group borrowing €100,000
This group proposed a plan to increase cow numbers from 80 to 120 cows post 2015 to justify an investment of €100,000. They advised that the money should be spent on extending the parlour from eight to 14 units, installing feeders and extending the existing cubicle shed. They recommended getting a farmyard expert to assess the area to make sure that the investment will leave the farmyard in a better position or, in other words, that the money is spent in the right place. They advised the farmer to take on extra labour in the spring because more cows calving will result in an increased workload. The big risk and justification they identified for only spending €100,000 is that there is 50% of the milking platform rented in the short term and if the farmer invests a lot of money and loses the land, then the business would not be left overexposed.
Group 3
Sub group borrowing €200,000
This sub-group suggested that to justify a €200,000 spend, the farmer needs to increase cow numbers to at least 140, but that this would leave him even more exposed as he has 50% of his milking platform on short-term lease. They also advised that extra land is needed for silage and young stock, which could be difficult. Obviously, they advised that the farmer should try and re-negotiate leases towards a rolling five or seven-year period, if possible. New parlour: They also advised the simple conversion and extension of existing cubicles and to spend the majority of the money on a new parlour that could be situated in a better place in the farmyard, improving cow flow and handling. They suggested installing a 24-unit parlour with cluster removers to keep it a one-person job. The major risk they identified is that extra profit from the additional cows needs to cover the annual repayments, which will be close to €20,000 per year over a 10-year period. The other risks they identified are:
Parcel of land: 50% of milking platform rented, so the farmer must be in a position to buy it if and when it comes up for sale. Increase output sooner rather than later, so there is more money to make loan repayments. Cashflow will be very tight for three to four years and, remember, stock sales will be non-existent. Keep it simple: If the farmer wants to keep going, more investment is needed but working conditions should be improved to handle extra cow numbers.
Jack Kennedy
For some farms, the lack of profitability in suckling means that the business is reliant on Single Farm Payment or another income source to cover the costs of production. Before getting out of suckling in 2011, Robin Clements was using his silage contracting business to subsidise his 70-cow herd.
With the income from silage contracting being heavily eroded by his suckler cows, he decided something had to change. As the land type is heavy, the farm is best suited to grass and livestock production. Robin had been considering a change to dairying for some time and, in September 2010, he purchased 52 maiden heifers for breeding that winter.
In September 2011, the farm started to produce milk with 80 cows in production in year one. The suckler herd, which was breeding Simmental and Limousin cross calves for the store trade, was dispersed through a number of special sales.
For Robin, the move to milk required plenty of planning. “You cannot simply flick a switch and move from suckling to milking. If you are not good at managing suckler cows, you will not be good at managing dairy cows. There is a lot to learn about milking cows. My discussion group has been a massive help in providing me with advice over the past few years,” states Robin.
Setting up
The sale of the suckler herd was used to finance the purchase of the dairy heifers. It is the investment in buildings where working capital can quickly become a limiting factor. Sheds were altered and extended to suit milk cows with 80 cubicles installed.
An additional slurry tank was constructed and feed passages were changed to suit using a diet feeder. The total cost of the changes made to livestock housing was approximately £120,000 (€151,600).
A secondhand (eight-unit double-up) milking parlour was purchased for £9,000 (€11,400) in the Republic of Ireland. It was one year old when purchased. The total cost of buying and installing the parlour, including a 6,000-litre bulk tank, was close to £40,000 (€50,500).
The reason for installing the secondhand parlour was simple. Robin had considered a robot system but, at a cost of £120,000 before adding in the cost of building sheds, it would have placed a severe debt burden on the farm. In Robin’s opinion, this would have left the breakeven cost of production too high. He would be no better off than when he was in suckling.
He is also a grassland enthusiast and prefers to have the cows milking off grass. As his grazing block is divided by public roads, grazing would be impossible with a robot system. A system of roadways within the grazing area were built at a low cost after digging up rock on the farm. Cows are milked twice a day with the whole process finished in 90 minutes.
A major asset on the farm is family labour. Robin’s wife, Heather, and sons Matthew (16) and Stephen (19) are heavily involved in the daily running of the farm.
Cow type
The herd has now expanded to 120 cows this year and rather than focusing on high-output Holstein cows, Robin decided to focus on a smaller cow yielding 7,000 litres on a grass-based system. Meal use has been higher than he would have liked at 2.5t/head in the past year, but the herd is young and yields are increasing. The target is to get meal back to 2t/cow while maintaining yields.
There are a number of crossbred cows in the herd, which is helping drive milk solids. This is an area that Robin sees becoming more important in the future. Cows are producing 3.37% protein and 4.07% butterfat and averaging 6,980 litres in the past year. Milk is supplied to Lakeland Dairies.
The aim is to produce all future replacements from within the herd, with high EBI bulls used over the top cows as identified from monthly milk recording.
Cows are bred using AI, with inseminations done by Robin. A Hereford bull acts as a sweeper. Surplus calves are sold off farm to repeat customers.
The herd is mostly autumn calving, with the aim to keep a tight calving pattern in future years. Around 90% of cows calve from September to December. This has meant that milk from forage is difficult to increase, with the herd averaging 1,344 litres from forage.
While it is a figure close to the benchmarked average, the target in the coming years is to increase this through making better silage, earlier grazing in spring and reseeding of old swards. Moving to spring calving has been considered, but it is unlikely to be pursued.
Cost of production
Last year, breakeven costs were 26p/litre (32.8c/l). Concentrate accounts for 8p/litre (10.1c/l) with grass at 2p/litre (2.5c/l). While concentrate use can be reduced, Robin maintains it is unlikely that the breakeven cost of production can be significantly lowered from its present level. The herd is benchmarked through
CAFRE. Robin maintains it is an exercise that more farmers should be doing.
Lessons learned
For Robin, the big benefit from milking cows is the steady cash income on a monthly basis. In suckling, he had two periods every year when cattle would be sold, which left cashflow under pressure.
Having a sound business plan was important when applying for bank loans. Robin worked with Cormac McKervey of Ulster Bank at the outset to plan the level of investment required.
Milking cows has represented a significant change in lifestyle. Robin is now tied to the farm, although he likes the routine of milking. The fact that he is being financially rewarded for his work makes it easier to do. Having family labour is also a help.
For anyone considering changing to milk, Robin would advise them to join a discussion group even before they start milking. It is a good opportunity to learn how to graze, feed and manage cows. Grassland management is vital and it is an area where many suckler producers are extremely weak. Soil fertility and reseeding are crucial.
The fact that Robin owns his own land helps. If he was predominantly on rented ground, he would not have gone into milk unless he had a long-term lease on the farm. The set-up costs are just too high to be operating on an annual conacre basis.
70-cow suckler herd changed to dairying in 2011.120 cows in milk.80ha grassland farm.Stocking rate: 1.76 LU/ha.Average yield: 6,980 litres from 2.5t/cow of concentrates.1,344 litre of milk from forage.I was with a discussion group in Clare this week and we spoke about some of the host farmer’s options in terms of the capital investment he required on his farm. The farmer owns 30ha but he is also leasing 30ha on a short-term basis. The cows can walk through the whole lot. He is milking 80 cows in an eight-unit milking parlour but needs to improve cow flow, reduce milking time and invest in more winter housing.
The discussion group split into three sub-groups and the chairman asked each group to justify, but also highlight, the risks of investing in the farm. The first sub-group was not allowed to borrow any money, the second could borrow €100,000 and the third €200,000. Below, I have summarised some conclusions from farmer discussions on the day.
Group 1
Sub-group that was
allowed zero borrowing
This group justified no spend because the industry is entering a potentially volatile period in milk price and overstretching the business could leave it vulnerable. The farm needs €60,000 per year for drawings, tax and borrowing repayments, so investing on farm at current stock numbers will not create more income in the short-term without a plan for growing output. This is assuming a profit of €700 per cow from the spring-calving herd. The group advised investing small amounts from cashflow, if there is a surplus, and to reassess the position after two to three years when there will be a clearer picture of what the future holds. The risk to not investing is that there will be plenty of hard work – a small parlour with poor cow flow and different wintering yards.
Group 2
Sub-group borrowing €100,000
This group proposed a plan to increase cow numbers from 80 to 120 cows post 2015 to justify an investment of €100,000. They advised that the money should be spent on extending the parlour from eight to 14 units, installing feeders and extending the existing cubicle shed. They recommended getting a farmyard expert to assess the area to make sure that the investment will leave the farmyard in a better position or, in other words, that the money is spent in the right place. They advised the farmer to take on extra labour in the spring because more cows calving will result in an increased workload. The big risk and justification they identified for only spending €100,000 is that there is 50% of the milking platform rented in the short term and if the farmer invests a lot of money and loses the land, then the business would not be left overexposed.
Group 3
Sub group borrowing €200,000
This sub-group suggested that to justify a €200,000 spend, the farmer needs to increase cow numbers to at least 140, but that this would leave him even more exposed as he has 50% of his milking platform on short-term lease. They also advised that extra land is needed for silage and young stock, which could be difficult. Obviously, they advised that the farmer should try and re-negotiate leases towards a rolling five or seven-year period, if possible. New parlour: They also advised the simple conversion and extension of existing cubicles and to spend the majority of the money on a new parlour that could be situated in a better place in the farmyard, improving cow flow and handling. They suggested installing a 24-unit parlour with cluster removers to keep it a one-person job. The major risk they identified is that extra profit from the additional cows needs to cover the annual repayments, which will be close to €20,000 per year over a 10-year period. The other risks they identified are:
Parcel of land: 50% of milking platform rented, so the farmer must be in a position to buy it if and when it comes up for sale. Increase output sooner rather than later, so there is more money to make loan repayments. Cashflow will be very tight for three to four years and, remember, stock sales will be non-existent. Keep it simple: If the farmer wants to keep going, more investment is needed but working conditions should be improved to handle extra cow numbers.
Jack Kennedy
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