Farmers should aim to improve their profitability ranking by focusing on areas that have a big impact, according to dairy consultant Lynaire Ryan.

At her board at the Moorepark Open Day, she showed how the range in profitability among a group of Irish dairy farmers followed a familiar bell-shaped curve. In the middle is the average, where most farmers are.

To the left are farmers that make less profit than the average, and to the right are farmers that make more profit than the average.

At the far left and the far right are the extremes, those making very little profit and those making lots of profit. This wide spread around the average provides an opportunity for improvement.

Lynaire says that blindly aiming to be in the top 10% of profitability is unrealistic for most people.

The average comparable operating profit among the 150 course participants was €1,600/ha

“For a typical farmer with 50 hectares, moving from slightly below average profit per hectare to slightly above average profit per hectare would generate an extra €20,000 in profit.”

“That’s a substantial sum of money, but the thing is it’s not hard to achieve, as all the ingredients are there for success. They just need to be put into practice,” she added.

The data in the graph is based on the financial performance in 2017 of last years’ course participants. The average comparable operating profit among the 150 course participants was €1,600/ha. Comparable operating profit excludes the money spent repaying loans, land rent and tax. The costs and the profit is worked out for the total farm business, ie all farm income and all farm costs, regardless of what enterprise they are for.

Importantly, Lynaire prefers to consider all hectares farmed, not just milking platform hectares. She also includes a ‘wage of management’ into the costs, to take into account farmer’s own time spent running the farm. Both of these factors usually reduce the profit/hectare figure, compared to the Profit Monitor results which don’t account for own labour and don’t use total farm costs.

I think the main difference is the operator and application of current knowledge

As shown in the bar chat above, the farmers in the top third make a comparable operating profit in excess of €2,400/ha while those in the bottom third make less than €1,200/ha. So why is there such a difference between farms?

“I think the main difference is the operator and application of current knowledge. The top people actually achieve targets. There is such a lot of scope on most farms to apply what we already know, with better management, to pick up more profit.

“We also know that pasture eaten and production over all the hectares farmed are the most important factors. This means having all hectares in productive use. Production per hectare on the milking platform is not a great indicator, as you can have a lot of unproductive land too,” Lynaire says.

‘Business Brush-Up’ is a four-day course run once a fortnight during September and October. Aurivo, Carbery, Dairygold and Kerry suppliers have their own subsidised courses, while courses in Moorepark and Carlow are open to all farmers.

These courses are aimed at dairy farmers who want to improve their business knowledge.

Topics include analysing current performance, identifying the steps you need to take to make more profit and evaluating personalities to build a better team.

I’d highly recommend Lynaire’s courses, I learned an awful lot from them, particularly the Business Brush-Up course, which then spurred me on to do the other ones

Tipperary dairy farmer Tom Downey attended the ‘Business Brush-Up’ course last year. He also did the ‘Strategic Management’ course and attended another on governance this year. Tom is currently on a career break from Teagasc, where he has worked as a dairy advisor for the last 17 years.

Tom Downey.

“I’d highly recommend Lynaire’s courses, I learned an awful lot from them, particularly the Business Brush-Up course, which then spurred me on to do the other ones. I got a different perspective on things and I was able to benchmark my own performance against other farmers and see where I could improve. Lynaire talks about the levers of profit and I suppose we were doing ok on most and needed to focus on soil fertility and we have since connected this,” Tom says.

Tom and his wife Ruth have expanded cow numbers from 100 in 2012, to 270 cows today, and they should reach their goal of 300 by next year. Tom says he’s been implementing a number of actions he learned on the course;

“Lynaire talked a lot about the farm team, so we’ve put more emphasis around building the team, including professional advisors like accountants. Ruth has got more involved in the farm and we’re already getting the children more involved too, which has been great.

"Another thing we do more of since doing the course is budgeting. We always prepared a budget but now we review and adjust on a regular basis and this gives us a clearer picture of what's ahead. One of the big lessons though, is the importance of time and money freedom.

"I never really understood what that meant but now we do and that’s going to drive a lot more decisions in the future.”