The cost of production is the number 1 factor driving profit for dairy farmers according to New Zealand-based consultant John Roche.
Speaking at the Irish Grassland Association Dairy Conference the Principal Consultant with New Zealand-based consultancy Down to Earth Advice said Irish farmers would have equalled any Kiwi farmer in the 1970s and need to embrace the opportunity of quota removal with both hands.
“It’s a great opportunity, but there is also the risk of a calamity. The April 1 date is an ironic date. But, whether it’s an opportunity of a calamity is up to you.”
He pointed to New Zealand and looked at those who expanded and those who didn’t. Staying the same, did not incur expenses of nearly ¾ the extra income generated through expansion and meant that the average New Zealand farmer is producing nearly 40% more milk but is not making any more money, he said.
The New Zealand statistics, he said, show that the increase in profit is due to an increase in milk price and that dairy farmers are not any better off for the system change.
“In fact, the cost of milk production has increased through the increased use of feed to such an extent that the viability of many farmers in a milk price downturn is questionable.”
New Zealand dairy farmers, he said, have increased milk production by increasing bought-in feed but they are making no more money.
“New Zealand was the lowest cost producer of milk and now its up with California and they are being paid more than 50% more for their milk New Zealand farmers are.”
He also said that increased feeding saw reduced utilisation of grass in New Zealand.
The future dairy farmer must be profitable, resilient and environmentally sustainable.
To make a profit, he said, it’s not about volumes but cost per litre and he encouraged every dairy farmer to ensure they know their cost production.