The top 20pc of dairy farmers earn an average of €57,000 per annum more than the bottom 20pc – our reporter investigates how to bridge the dairying income divide.
Fancy earning an extra €1,000 a week?
Sounds like a stupid question, but it’s one way of looking at a comparison of the profitability of the top 20pc of dairy farmers with the bottom 20pc.
The latest National Farm Survey results from 2015 show that good dairy farmers made an extra €57,000 over those languishing at the bottom of the league. This was despite the fact that the top quintile had 2ha less than the bottom quintile’s average of 53ha.
These figures are not based on any special subset of dairy farmers – they’re from a large random sample that is almost identical to the national average, with 70 cows producing just over 5,000 litres per cow and a stocking rate of less than two cows per hectare.
Can anything be done to help those at the wrong end of the scale?
Two of Ireland’s top dairy specialists, Teagasc’s Padraig French and independent advisor Mike Brady believe that any dairy farmer can improve their profitability.
Here’s 10 steps to putting more money in the bank.
“How badly does the farmer want to change is the question that is running through my head if I ever get a call from somebody that is trundling along in the lower leagues,” says farm advisor Mike Brady. “To be fair, if they’ve even made the call, that’s a good start. But they must be motivated to do better, otherwise we’re all wasting our time.”
However, Brady acknowledges that there are horses for courses. “There’s plenty of farmers out there that are not maximising their profitability and they are perfectly happy with that. They might be lowly stocked but an extra line of cows is the last thing that they want to see coming into the parlour,” he says.
“It’s what the farmer wants to do – there’s no point arriving into a pedigree set-up and telling them to throw out all the cows and start again with crossbreds. Yes, the latter might be more profitable on paper, but it doesn’t always come down to what is in the bank account.”
Brady also cites other dynamics such as partners, kids, parents and siblings as important factors in determining how a farm is run.
“Is there a brother waiting in the wings, is dad still the one really pulling the strings, or is a partner expecting more than the farm can cope with at this point?”
The figures can be made tell very different stories, depending on who you are telling, and what you want them to hear. But Mike Brady still likes to start out with detailed accounts.
“Before I walk a farm I like to get my hands on three to four years of accounts. Sure, accounts can be massaged for tax or lending purposes, but the truth is still plain to see in there. I find it a better picture of reality than a profit monitor.
Any question marks over stock inventories can be cross-checked with the ICBF data, while that source will also give me an overview on the genetic merit and potential of the herd.” Mike also uses SCC and TBC figures to gauge how good a stockperson the farmer is.
3 Soil fertility
With Teagasc estimating that over 90pc of farms are at sub-optimum levels of fertility, this is invariably a big issue for any farm trying to up its game. Soil tests are the starting point, and some co-ops like Lakeland Dairies have special offers available at the moment. But it’s what you do with them that counts, according to Teagasc’s Padraig French.
“Getting your soil pH right is the first thing, and this will vary depending on the type of soils you are working on. So peaty soils will be okay at pH5.7 but brown podzolics need to be closer to pH6.3. This will allow you to get the most out of your fertiliser,” he says.
Getting Ps and Ks up in heavier soils can be a more expensive and long-term exercise than the text books suggest, but it will still pay off for the dairy farmer.
“Provided you are turning the extra grass grown on the back of the better fertility into milk, you’re going to be winning. For example, getting phosphorus levels up to the optimum index 3 promotes better winter growth, which is extra valuable to farmer trying to extend their grazing season,” claimed the Teagasc man.
4. Grass, grass, grass
“At its simplest, 10kg of grazed grass drymatter produces 1kg of milk solids,” says Padraig French. “That’s converting about €1 of feed into €4.50 of milk. That’s a big mark-up, and any other feed will reduce that mark-up.
“Every decision in the spring-calving herd should be aiming to maximise grazed grass to the point where it accounts for 70pc of the diet.”
Mike Brady says that many under-performing dairy farmers are growing lots of grass, but just not utilising it properly.
“Grass utilisation is something that even our better farmers are struggling with.
“Getting more than 80pc of the grass you grow into the cow is impossible if you are feeding lots of supplements and topping all the time. This is an awful waste,” says Mr Brady.
Despite this, experts believe that Irish dairy farmers may have surpassed the Kiwis – who were considered the king-pins of grazing systems.
“Very little of the additional milk in New Zealand in recent years has come from extra productivity per hectare,” says Dr French. “Most of it is from additional land and supplementary feeding. They can still grow more grass with 20tDM/ha possible, but we are pushing 16tDM/ha in Moorepark now and clover is going to increase that again.”
5. Grazing infrastructure
Growing lots of grass is only one part of the equation – you need to be able to get the cows to it in all weathers, and off it just as quickly when bad conditions threaten to destroy profitable swards with poaching.
“Between fencing, water and roadways, you wouldn’t have much change out of €800/ha to set up a farm properly, but after that there’s very little annual maintenance on a per hectare basis, but that doesn’t mean that it doesn’t have to be done,” says Padraig French.
Certainly as herds increase in size, and distances to pasture increase, lameness and cow mobility will be key welfare and profitability issues, all of which will depend on good laneways.
However, Mike Brady also recommends that every farm is mapped to get an accurate handle on the areas involved.
He also stresses the importance of maximising the size of the milking platform. “This is the new quota. And comparing the top and bottom quintiles in the National Farm Survey, it’s noticeable that the top guys have squeezed an extra 13pc of their farm into the grazing area for the cows – even though they had less hectares overall.
“That extra 4ha could handle 12 extra cows in a good set-up. Where there’s no rented land or hired labour, that’s worth up to €12,000 extra net profit even with milk price in the low 30s.”
6. Compact calving
This is a key element to maximising the power of grass in a dairy operation.
“You want your cows to start calving early enough so that their peak demand will match grass growth. This will vary according to how far north you are located, so it tends to be about the second week in January for farms in Cork, while it could be two weeks later in Cavan,” says Padraig French.
“But the key thing is to have all the calving finished before you start breeding, so about 13 weeks is the ideal. This, along with stocking rate, is one of the two key strategic decisions that every farm can make to suit themselves.”
7. Stocking rate
The top 20pc of dairy farmers able to run an extra 0.3cows/ha, and the reason they are able to do this is because they grow more grass.
“You will need a minimum of 4tDM/cow, so if you are able utilise 12tDM/ha you can run 3 cows per hectare – but you need to be growing about 15tDM/ha to achieve that,” explains Padraig French.
It’s this ability to grow more grass and pump up the stocking rate that is the key difference in many ways for the top performers.
“In the times of quota, all the focus was on cost per litre,” says Mike Brady. “Now the limitation is the size of the milking platform. And it’s clear from comparing the top and bottom ranked farmers that the vast majority of the difference in profitability is in the output per hectare, which is heavily influenced by the stocking rate.”
Brady suggests that the top quintile of dairy farmers sampled in the survey could boost their bottom line even more if they maximised their stocking rates.
“Based on these figures, the farmers in the top 20pc could milk an extra 30 cows if they were able to increase their stocking rates.
“That could be worth an extra €30,000. Sure, it would need some extra facilities and labour but it isn’t rocket science. In fact, if three to four units could be added to the parlour, milking time would be very similar.”
The 500kg liveweight cow producing 500kg of milk solids a year with a supplementation rate of 500kg of meal is the holy grail for many spring calving herds today.
However, in simple terms the cows needs to be fertile enough to cope with a compact calving system, and be an efficient converter of feed. The EBI is as good a measure of this as anything.
“The EBI is breeding for dummies,” claims Mike Brady. “If you want to go up a league, you should also be looking at the sub-indices, and the real top division stuff examines the predicted differences to see what the herd potential is.”
9. Cost control
A lot of emphasis has traditionally focused on the cost of production, and rightly so. However, the comparison between the top and bottom league operators shows that there was only €8,000 difference in favour of the more profitable farmers.
However, the difference in output was closer to €50,000, which emphasises the ability of focused farmers to maximise output per hectare.
“Dairy farmers are brilliant at paring back on costs during a low milk-price year, but it’s also easier to do in a low input system,” explains Padraig French. “In a high input system, you can’t really take a ‘break’ on fertiliser inputs, or reduce the ‘expensive’ like meals in the grass-based set-up.”
How long does it take to turn a poorly performing farm into a top-level operation? “It could be as little as six months, but more often it takes two to three years,” says Mike Brady. “It could take longer, and ultimately every farm has room for improvement.”
The extra effort is surely worth it, especially when you consider that the gulf between the top and the bottom performers only gets bigger with higher milk prices.
The €57,000 difference in 2015 was based on an average gross milk price of 31c/l. But this would balloon to €68,000 if the base milk price was 20pc higher.
(Story first published by Darragh McCullough for The Farming Independent 19/01/2017)