Operating as a dairy farmer under the current business environment is undeniably challenging.
aking stock of this, it’s important to view the business in its most basic terms; we have a policy and regulatory framework that govern how we manage our farm and its inputs, and that in turn dictates the level of output which ultimately is our income.
Neil and I are currently attempting to put a business plan in place, looking at the next 12 months in the short term and 3 to 5 years in the medium term where we are trying to quantify the impacts of change on the farm.
The challenges are quite clear when you look at the business in terms of those three pillars – regulation, inputs and output. Newer proposals around the nitrates directive clearly point towards reducing nitrogen flows in all aspects of the farm system, while the post-convergence CAP tells of a rebalancing of payments from high to low.
Coupling this with the emission reduction targets for agriculture between 21pc and 30pc where even at the lower end of the scale, a 5pc reduction in the dairy herd is required and increasing to 18pc at the higher end– the policy direction around dairy farming is very clear.
Around farm inputs, the big three are feed, fertiliser and labour. Concentrate prices have already increased by over 20pc this year and the doubling of fertiliser prices will have one of the most significant impacts on the industry in the coming 12 months.
If you consider an average dairy farm of 82 cows spent around €13,000 on fertiliser according to the national farm survey from 2020 which represented close to 9pc of total costs.
Last year’s Teagasc research on nitrogen usage has shown that reducing nitrogen usage from 250kgN/Ha to 200kgN/Ha resulted in a grass growth differential of 14.2tDM/Ha versus 13.4tDM/Ha.
In modelled scenarios of reductions in fertiliser usage where cow numbers are reduced to match lower grass growth or held constant and greater levels of purchased concentrate are incorporated to fill the feed gap, the outcome is clear; a greater reduction in farm profitability is seen where cow numbers are maintained and fed with purchased concentrate versus a reduction in line with grass growth.
Forward planning nitrogen usage, estimating pasture production and stocking appropriately is our focus as well as continuing the clover incorporation programme we have been working on since 2019 using both over-sowing and full reseeds.
Our grass-based systems of the future need to focus on maximising grass production and utilisation with clovers and MSS, getting the most from nutrients applied and minimising the amount of feed imported onto the farm.
Ultimately that leaves us with considering our output. Milk composition strongly affects farm income with genetics and management playing a big role. As farmers who milk OAD, a core part of our resilience is around having a rock solid milk price. OAD maximises the value to be had from the milk pricing structure of A+B-C, where A is the price paid per kilogram of protein, B is the price paid per kilogram of fat and C is a processing charge.
The processing charge is approximately 4c/L and is not something to overlook as increasing milk fat and protein percentages generates higher milk solids in a lower milk volume. Averaging over 42c/L for 2020 and supplying milk that is over 7c/L ahead of the average TAD herd while delivering 438kg MS/cow maximises the A+B-C formula for milk payment. Into the future we will increasingly require a strong milk processor that will deliver the best milk price for its suppliers.
The recent rumours around the sale of Glanbia PLC’s 40% share of Glanbia Ireland should be monitored closely.
Full ownership of Glanbia Ireland by the Co-op will lead to a better milk price for farmers as long as an equitable valuation is agreed on by both the Co-op and the PLC.
As farmers, we must be mindful of the fact that a PLC is owned by its shareholders and run by its directors with the primary goal of generating profit to maximise shareholder value – this isn’t a neighbourly land swap.
The deal is vitally important to the stability of dairy farm incomes into the future.
Ultimately, for our farms into 2030 and beyond each area of regulation framework, inputs and output need careful consideration. How does your milk composition affect your income?
Will grassland management and stocking rate on the farm change with a reduction in nitrogen usage? Can the business afford to purchase fertiliser at twice the price?
The answers impact our businesses in a significant way and each area needs to be thrashed out with clear facts and an open mind, some ground hurling goes a long way.
Gillian O’Sullivan farms with her husband Neil near Dungarvan, Co Waterford
