Dairy margins set to improve in 2017
Rising cow numbers, yields and prices are all expected to add to dairy farmers' income next year, according to Teagasc.

Based on forecast production levels, output price and input cost movements, dairy margins are likely to improve in 2017 compared with this year, according to the Teagasc Annual Review and Outlook. The report forecasts an average net margin on Irish dairy farms of 10.5c/l or €1,198/ha in 2017.

In 2016 milk production increased by an estimated 5% due to an increase in cow numbers. This trend is forecast to continue in 2017 based on an increase in cow numbers and yield improvement. Any additional milk produced next year is expected to be at a low marginal cost, contributing to the increase in margin achieved per ha.

Listen to "Discussing Teagasc's outlook for 2017" on Spreaker.

Apart from fuel, input costs on dairy farms in 2017 are expected to stay the same as this year.

The forecast, presented by Trevor Donnellan, shows a 15% to 20% increase in the average annual milk price next year. However, the build up of SMP stocks is an area of concern, with market demand needing to be robust enough to allow stocks to be released without adversely affecting price.

Read more

Teagasc sees 5% farm income growth next year

Dairy markets: WMP prices remain flat as Chinese import demand tails off

Full coverage: Teagasc outlook 2017

Read the full report: Teagasc annual review and outlook

Teagasc outlook: did 2016 forecasts come true?

Exclusive: Iceland to pay an extra 2c/l for fresh milk
Chair of the Fresh Milk Producers group Jim Mulhall has challenged other retailers to follow suit.

Retailer Iceland Ireland has decided to pay an extra 2c/l to its milk suppliers and has instructed that this must be passed back directly to the farmers.

It said that this is part of its social responsibility policy and commitment to sustainability in local communities.

“This extra 2c being paid directly to the dairy farmer will be fully absorbed by Iceland Ireland and will in no way be passed on to the customer,” a statement from the company read.

“We always put customers first and that means a combination of great value, great products and a sustainable supply chain,” managing director of Iceland Ireland Ron Metcalfe said.

“This commitment hits the mark on all fronts for the communities we serve. Our mission has always been to offer the best value to our customers while supporting our local suppliers.”

The move follows heavy farmer opposition to its discount pricing of fresh milk, which was for sale at the equivalent of €1.45 for two litres.

Retailer and FMP chair Jim Mulhall called on all other retailers of fresh milk to follow Iceland’s lead and match the 2c/l offer.

“Liquid milk farming is a specialised operation which incurs extra costs of feeding, labour management and capital investment.

“While growth conditions are much improved, there is a huge deficit in winter forage supplies, which will cost liquid milk farmers dearly to replace,” Mulhall said, welcoming Iceland’s announcement.

Meanwhile, a spokesperson for German discounter Aldi told the Irish Farmers Journal it “introduced an additional branded fresh milk line in a select number of stores in response to local competition”.

“This product retails at €1.45 for two litres ... the cost of our price reductions and amazing prices are always borne by Aldi. Aldi pays a fair and sustainable price for all our products,” the spokesperson said.

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Two seats up for grabs on National Milk Agency board

Kerry shareholders call for EGM
The newly formed group firms up its opposition to the Kerry Co-op board's strategy.

The Kerry Co-op Shareholders’ Alliance has called for an EGM to allow shareholders to have their say on the potential future investment in milk-processing assets.

The alliance was established in direct opposition to the co-op boards’ stated strategic goal of acquiring milk processing assets either through outright purchase or a strategic alliance with Kerry Group.

They believe the board does not have a mandate to do this, and are calling for an EGM to allow shareholders have their say on the issue.

Kerry Co-op has assets worth €2bn, almost completely comprising their 13.7% shareholding in Kerry Group plc.

The shareholders’ alliance has been meeting with shareholders around the Kerry region to explain their position, which is encapsulated in the following four points:

  • Kerry Co-op shareholders are entitled to the full value of their shares and the shares should be converted now.
  • This can be done in a tax-efficient manner.
  • Shareholder funds should not be used to purchase Kerry Agribusiness or invested in milk-processing assets.
  • After rolling out the shares, Kerry Co-op could be a more effective representative structure for dairy farmers if it includes all milk suppliers and only milk suppliers and focuses exclusively on the issues affecting dairy farmers.
  • Arbitration

    Meanwhile, the long-awaited arbitration hearing over the “thirteenth payment” for 2013 takes place next month, although it could be months before the arbitrator delivers his verdict.

    The dispute between Kerry milk suppliers, represented by the co-op and Kerry Group plc, has damaged relations between the parties.

    Kerry Co-op has an option to purchase Kerry Group’s agribusiness, although this must be enacted by January 2019, and does not involve dairy processing assets.

    Read more

    What lies ahead for Kerry Co-op?

    Kerry Co-op's destiny to be decided

    Reducing energy costs on dairy farms
    Peter Varley talks to Michael Breen and John Upton from Teagasc about ways dairy farmers can reduce energy costs associated with milk harvesting.

    Energy costs on Irish dairy farms can be quite substantial. Fortunately, there are a number of changes farmers can make in order to reduce costs on their farm.

    Teagasc has a number of energy cost-saving ideas for dairy farmers. Before looking inside the farm gate to make savings, it is important that farmers shop around for the best electricity rates. “Bonkers.ie will show the difference in price between different suppliers and it makes it easier for farmers to compare tariffs,” Michael Breen explains.

    “Prior to making any changes to your farm in terms of energy usage, it is important to first check how your farm’s electricity costs compare with the average costs on conventional dairy farms,” says Michael.

    The average costs are €5 per 1,000 litres of milk sold. He said this figure ranges from €2.60 to €8.70 per 1,000l of milk sold. “If your farm is at the lower end of this scale, there is probably not an awful lot you can do to reduce your energy costs,” says Michael. However, if it is on the higher end of the scale, there are a number of options available to reduce energy costs, according to Michael.

    Milk cooling, water heating and the milking machine are the top three energy consumers on dairy farms. They make up approximately 75% of the farm’s energy usage and therefore offer the most potential to reduce energy costs. There is a very useful online Dairy Energy Decision Support Tool, funded by the Sustainable Energy Authority of Ireland (SEAI) and developed by Cork IT and Teagasc. This tool will let the user know if certain energy-saving technologies will be worthwhile on their individual farm, and if there will be a return on investment. The tool is free to use and is available at http://messo.cit.ie/dairy.

    Milk cooling

    Milk cooling makes up 31% of on-farm energy costs. The main way to reduce energy costs for milk cooling would be to install a plate cooler. “Teagasc research shows that installation of a plate cooler will pay for itself within five years,” he explains.

    Michael warns that just because a plate cooling system is installed, it does not mean it is working efficiently. “An efficient plate cooling system should have a 2:1 water to milk ratio. This means that for every litre of milk flowing through the plate cooler, you need two litres of water flowing through at the same time.

    ‘‘One way to check if this ratio is correct is to measure the temperature of the cold water entering the plate cooler, and the temperature of the milk exiting the plate cooler, before it enters the milk tank. The difference in these temperatures is a very good indicator of the water to milk ratio. If the temperature difference is approximately 5°C, it is a sign that ratio is correct,” says Michael.

    Using a variable speed drive (VSD) milk pump is an important aspect in achieving the correct water to milk ratio. These pumps speed up or slow down depending on the amount of milk entering the milk receiver jar.

    “A VSD milk pump ensures that there is a more even flow of milk through the plate cooler which increases the ability of the water to cool down the milk in the plate cooler. The SEAI has launched an energy-efficiency grant for the dairy sector, which provides a grant of 40% on the cost of retrofitting a VSD milk pump to an existing milking machine. Application forms can be accessed via the SEAI website,” explains Michael.

    In terms of the milk cooling tank itself, there are two main types available, direct expansion and ice bank. “According to our research, if you were to install a new milk cooling system in the morning, in terms of profitability the best one to install would be a direct expansion system with plate cooling,” Michael says.

    Water heating

    Water heating accounts for 23% of on-farm energy costs. There are three main systems that farmers use: electric heating elements, oil or gas heating.

    “Teagasc research shows that electric heating systems are the best blend of running costs and investment cost for most farmers,” says Michael.

    “The electric water heating should start at midnight using a timer. Night-rate hours run from midnight to 9am in summer time, with night-rate electricity costing about half as much as day-rate electricity per unit,” he explains.

    Michael says that some farmers prefer gas because it provides instant hot water with lower running costs than electricity, but when the capital costs are considered, water demand would need to exceed 500 litres per day in order to deliver a positive return on investment.

    Milking machine

    John Upton says the vacuum pumps of the milking machine account for 20% of the farm’s total electricity consumption. “There is a technology available called a variable speed drive (VSD), which can be applied to the vacuum pumps and is proven to dramatically reduce the electricity consumption of these vacuum pumps by over 60%,” he explains.

    John says that in addition to the financial benefits realised due to reducing electricity consumption, the VSD technology also reduces the noise generated by these pumps which makes the dairy a much quieter place to work.

    Finally, the wear and tear and oil consumption of the pumps is reduced since they will be running at a reduced speed during milking, according to John.

    “During milking, the milking machine’s air consumption is a fraction of the vacuum pump capacity resulting in large amounts of air being drawn in through the regulator. Since the vacuum pump motors only operate at full speed in a regular installation, addition of a VSD to the vacuum pumps of these large modern milking machines can result in savings of over 10% on total farm energy costs,” he said.

    The VSD is able to adjust the rate of air removal from the milking system by changing the speed of the vacuum pump motor to equal the rate at which air is admitted to the system at a given vacuum level.

    All of the energy used to move air through the conventional vacuum regulator is saved.

    A sensor is added to the main airline to measure the vacuum in the milking machine and the VSD controls the speed of the motor to maintain the desired vacuum level, John says.

    The SEAI energy efficiency grant for the dairy sector provides a grant of 40% on the retrofitting of VSDs to vacuum pumps. The scheme will refund up to €5,000 of the cost of the technology on single-phase pumps and €3,000 for three-phase pumps. For single-phase farms, the payback varies from eight years for a 16-unit milking machine, to seven years for a 24-unit milking machine whereas the payback would be less than five years for most three-phase milking machines over 16 units.