Most dairy farmers are now heading into the period where there is more free cash available. This happens when the milk payments are greater than the farm’s costs and the household living expenses. The amount of free cash available this year will be back a good bit on last year, because there were higher costs this spring and because milk prices and yields are back on last year.
That said, many farmers have planned to spend money on various things and the higher costs or the drop in milk price probably won’t change their minds. In most businesses, investment decisions are made based on the return from making that investment. The return on capital is calculated by dividing the capital cost of the investment into the extra profit. The return on capital should be greater than long-term interest rates and ideally greater than 6 or 7%.
For me, investing in roadways, soil fertility, drainage, reseeding, fencing and breeding stock will trump anything else in terms of return on investment.
But, sometimes, investment is needed in other areas to protect the core of the business and make the overall farm easier to work. While the return on some of these investments might not be as high as it could be, it can deliver payback in other ways.
The following is a list in no particular order of potential areas for investment on dairy farms this summer.
Simplify the farmyard: on many farms cows were in and out of sheds from early November last year to the end of April this year. That’s six months of the year and it was tough going on cows and people. While it was an exceptionally long winter, working in poorly designed farmyards added greatly to the workload. There is not a whole lot you can do with existing buildings but there are always things that can be done to simplify housing, feeding, cleaning and moving stock. Linking cubicle sheds together would mean less groups of cows to be fetched for milking. Increasing the amount of feed space would mean that the cows can be fed every second day or practise nighttime feeding, thereby reducing the workload. Make it easy to handle cows: a good handling facility takes the drudgery out of dosing and separating cows. It is something you notice on labour-efficient farms – they don’t waste time or risk injury working in inadequate facilities. A good unit will last a lifetime. A drafting gate is a necessity on every farm. Automatic drafting gates cost around €10,000 and can be justified on larger farms but, for the average herd, a simple spring operated gate costing less than €300 will draft out the cow that you want. During spring, some farmers will run the dry cows through the parlour every few days and draft out the springing cows. Build up silage stocks: many farmers find it hard to keep money in the bank. As we experienced this spring, silage is another form of wealth. A good few farmers are looking at increasing the amount of silage being made this year, to replenish stocks. This costs money in terms of growing extra grass and also harvesting and storing it. But it is a good investment as it can be used in a year when cash is tight or growth is poor. It is also a very tax-efficient way of saving money. Buying silage is an option but before you do, work out the cost in terms of cent per kilo of dry matter. Divide the total kilos of dry matter being purchased into the total costs involved. Anything less than 18c/kg DM is decent value. For example, if a fertilised silage field costs €240/ac and it costs another €120/ac to harvest it then the total cost per acre is €360/ac. If it is a 10t/acre crop, at 20% dry matter equates to 2,000kg DM/acre costing 18c/kgDM.Spring efficiency: there is a huge amount of time taken up in spring with calving cows and rearing calves. Modern facilities are no guarantee of labour efficiency. In fact, some new sheds I have seen are very inefficient. What you want is a shed layout that enables a smooth flow of cows to the calving shed and back to the milking parlour, calves to the calf shed and milk from the parlour to the calf shed. Within the calf shed, in larger herds there is a move towards larger pens of up to 30 calves. This is OK provided there is proper ventilation and enough lying space within the shed and all calves can be fed properly. There is a big increase in the use of automatic feeders. They cost between €8,000 and €12,000 each and can feed between 30 and 120 calves. Compared with bucket feeding, they are a lot more efficient. But there are other ways of feeding a large number of calves very quickly. Once-a-day feeding with a trailed feeder reversed into a U-shaped gate is a very efficient way to feed a lot of calves. The other drawback with automatic feeders is their lack of flexibility as most only use milk powder, higher disease risks, higher electricity costs on top of annual service and repair bills.
It is hard to do without a cubicle for every cow on the farm: keeping dry cows in a separate yard is fine for the winter, but the issue is when most or all the cows are calved and weather turns bad – where are the milking cows going to go then? There are lots of short-term measures available, such as sharing cubicles between night and day and using yards to stand cows off in. They work OK for short periods but, in the long term, how sustainable is it? How sustainable is it to ask employees to do that kind of work?
Cubicle specs
When it comes to building a cubicle, the costs vary dramatically from €500/cow to nearly €2,000/cow depending on the spec and whether there is slurry storage and roofs included. Add on to existing cubicle sheds, if possible, and build it in such a way that it can be expanded itself. If bank finance is going to be used, planning permission will be required. Give yourself at least four months between signing the loan agreement and drawing down the funds.
The best way to improve overall performance is to start at the worst performing part. Ask yourself what is the issue? If it’s not drainage or an obvious grass species problem, then it must be soil fertility. If drainage is the problem, invest wisely. The one size fits all approach to drainage has cost many farmers dearly.
Field drains must be placed where water is moving in the soil. This could be 2ft deep or 10ft deep. Deeper will cost more to dig out, but will use the same amount of stone. The next thing is to make sure that the outfall is lower than the field drains. Depending on the method used, proper drainage work will cost between €1,500 and €3,000 per acre.
As evidenced by the Teagasc heavy soils programme, even the swampiest of land can be turned into productive grassland when proper techniques are used.
Timing your reseed - ‘first half of the year is the optimal window’
Average milk price ‘in the low to mid-30s this year’ – Arrabawn
Most dairy farmers are now heading into the period where there is more free cash available. This happens when the milk payments are greater than the farm’s costs and the household living expenses. The amount of free cash available this year will be back a good bit on last year, because there were higher costs this spring and because milk prices and yields are back on last year.
That said, many farmers have planned to spend money on various things and the higher costs or the drop in milk price probably won’t change their minds. In most businesses, investment decisions are made based on the return from making that investment. The return on capital is calculated by dividing the capital cost of the investment into the extra profit. The return on capital should be greater than long-term interest rates and ideally greater than 6 or 7%.
For me, investing in roadways, soil fertility, drainage, reseeding, fencing and breeding stock will trump anything else in terms of return on investment.
But, sometimes, investment is needed in other areas to protect the core of the business and make the overall farm easier to work. While the return on some of these investments might not be as high as it could be, it can deliver payback in other ways.
The following is a list in no particular order of potential areas for investment on dairy farms this summer.
Simplify the farmyard: on many farms cows were in and out of sheds from early November last year to the end of April this year. That’s six months of the year and it was tough going on cows and people. While it was an exceptionally long winter, working in poorly designed farmyards added greatly to the workload. There is not a whole lot you can do with existing buildings but there are always things that can be done to simplify housing, feeding, cleaning and moving stock. Linking cubicle sheds together would mean less groups of cows to be fetched for milking. Increasing the amount of feed space would mean that the cows can be fed every second day or practise nighttime feeding, thereby reducing the workload. Make it easy to handle cows: a good handling facility takes the drudgery out of dosing and separating cows. It is something you notice on labour-efficient farms – they don’t waste time or risk injury working in inadequate facilities. A good unit will last a lifetime. A drafting gate is a necessity on every farm. Automatic drafting gates cost around €10,000 and can be justified on larger farms but, for the average herd, a simple spring operated gate costing less than €300 will draft out the cow that you want. During spring, some farmers will run the dry cows through the parlour every few days and draft out the springing cows. Build up silage stocks: many farmers find it hard to keep money in the bank. As we experienced this spring, silage is another form of wealth. A good few farmers are looking at increasing the amount of silage being made this year, to replenish stocks. This costs money in terms of growing extra grass and also harvesting and storing it. But it is a good investment as it can be used in a year when cash is tight or growth is poor. It is also a very tax-efficient way of saving money. Buying silage is an option but before you do, work out the cost in terms of cent per kilo of dry matter. Divide the total kilos of dry matter being purchased into the total costs involved. Anything less than 18c/kg DM is decent value. For example, if a fertilised silage field costs €240/ac and it costs another €120/ac to harvest it then the total cost per acre is €360/ac. If it is a 10t/acre crop, at 20% dry matter equates to 2,000kg DM/acre costing 18c/kgDM.Spring efficiency: there is a huge amount of time taken up in spring with calving cows and rearing calves. Modern facilities are no guarantee of labour efficiency. In fact, some new sheds I have seen are very inefficient. What you want is a shed layout that enables a smooth flow of cows to the calving shed and back to the milking parlour, calves to the calf shed and milk from the parlour to the calf shed. Within the calf shed, in larger herds there is a move towards larger pens of up to 30 calves. This is OK provided there is proper ventilation and enough lying space within the shed and all calves can be fed properly. There is a big increase in the use of automatic feeders. They cost between €8,000 and €12,000 each and can feed between 30 and 120 calves. Compared with bucket feeding, they are a lot more efficient. But there are other ways of feeding a large number of calves very quickly. Once-a-day feeding with a trailed feeder reversed into a U-shaped gate is a very efficient way to feed a lot of calves. The other drawback with automatic feeders is their lack of flexibility as most only use milk powder, higher disease risks, higher electricity costs on top of annual service and repair bills.
It is hard to do without a cubicle for every cow on the farm: keeping dry cows in a separate yard is fine for the winter, but the issue is when most or all the cows are calved and weather turns bad – where are the milking cows going to go then? There are lots of short-term measures available, such as sharing cubicles between night and day and using yards to stand cows off in. They work OK for short periods but, in the long term, how sustainable is it? How sustainable is it to ask employees to do that kind of work?
Cubicle specs
When it comes to building a cubicle, the costs vary dramatically from €500/cow to nearly €2,000/cow depending on the spec and whether there is slurry storage and roofs included. Add on to existing cubicle sheds, if possible, and build it in such a way that it can be expanded itself. If bank finance is going to be used, planning permission will be required. Give yourself at least four months between signing the loan agreement and drawing down the funds.
The best way to improve overall performance is to start at the worst performing part. Ask yourself what is the issue? If it’s not drainage or an obvious grass species problem, then it must be soil fertility. If drainage is the problem, invest wisely. The one size fits all approach to drainage has cost many farmers dearly.
Field drains must be placed where water is moving in the soil. This could be 2ft deep or 10ft deep. Deeper will cost more to dig out, but will use the same amount of stone. The next thing is to make sure that the outfall is lower than the field drains. Depending on the method used, proper drainage work will cost between €1,500 and €3,000 per acre.
As evidenced by the Teagasc heavy soils programme, even the swampiest of land can be turned into productive grassland when proper techniques are used.
Timing your reseed - ‘first half of the year is the optimal window’
Average milk price ‘in the low to mid-30s this year’ – Arrabawn
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