Drought hardship: ‘Every dairy farmer should cull early’

The total potential cost of the ongoing drought on a 100-cow dairy herd over a seven-day period is circa €2,600, Irish Farms Accounts Co-operative (IFAC) has cautioned.

The financial advisory service reached this figure after taking into account the impact of the prolonged drought and extreme recent heatwave conditions on yields, demand for concentrate feeds and fodder costs.

Philip O’Connor, head of Farm Support at IFAC, said that a number of heatwave-related issues are “really starting” to impact on farmers.

He said water shortages have become a massive issue.

If a farmer is struggling to get enough water into animals it will 100% hit profitability. Milk yields will plummet.

“The average milk price is circa 31c; every litre back in production is a direct cost,” he said.

With each cow needing between 100L to 130L of water per day; O’Connor highlighted that increased pressure is mounting on public supplies.

“Wells that haven’t dried up in living memory are now going dry,” he said.

On the production side, O’Connor said that “nearly every farmer” will take a hit – even if they are getting enough water.

“The average farm is probably back one to two litres a day. The CSO (Central Statistics Office) has national production back 0.4% on May.

However, in reality, this figure is higher as there are more cows in the national herd in 2018 compared to 2017 – plus the national herd is maturing.

“It will 100% be further back for June/July,” he warned.

Peak yield problems

O’Connor anticipates that “very few cows” will reach their peak milk yield over 2018 – taking into account the late spring and the current heatwave.

“Every farmer is potentially back a number of litres,” he said.

The IFAC advisor pinpointed the likely cost implications of a reduction in milk production on the average cow – producing 5,000L/year at a rate of 30c/L – as the following:
  • 5% cost per cow – €75;
  • 10% cost per cow – €150;
  • 15% cost per cow – €225.

“If yield over the year is back 10%, over 100 cows, this will result in a cost of €15,000 on production alone,” he said.

Doing Your Numbers

He stated that costs are “rising alarmingly” as extra concentrates and feed are added to the diets.

“For example, if a farmer was feeding an extra 6kg of concentrates at €275/t, this is €1.65. If he was to add 12kg of baled silage, at a cost of 14c/kg, this is €1.68; plus a yield drop at 45c, means this comes to a total of €3.80 per day,” he said.

“For a 100-cow herd over seven days, that adds up to €2,600,” he said.

O’Connor advises that every farmer needs to do this calculation for the purposes of their own cash flow.

“How much is it costing you and how are you going to finance it?” he asks.

He warned that such outlays are going to remain for a number of weeks.

“If grass growth starts tomorrow it will still be a number of weeks before there is any significant cover on fields to start grazing,” he said.

Early culling

In terms of the impact of the drought on factory prices, the IFAC advisor said one option is to “de-stock”.

If fodder is an issue, every farmer should look at culling unproductive cows – ideally this is all you should cull. More serious culling may be needed if fodder deficits are too big for winter.

“This is a last resort. Culling productive animals will have knock-on effect to next year,” said O’Connor.

Following decisions from pillar banks and co-ops to extend credit terms; IFAC’s key advice to farmers is to complete a cash-flow budget.

“Banks hate surprises. It is very important to put credit facilities /  interest-only repayments in place now rather than waiting for an overdraft to be overdrawn and then applying.

“It’s much better to have it organised and not need it, rather than need it and not have it.”

Key details needed in such plans include: a fodder budget; options on how to bridge any deficit gap; and plans for cash-flow shortages.

“Problems must be managed – do not bury your head in the sand. There are always options if planned and reviewed before the problem happens,” O’Connor concluded.

IFAC will soon launch a fodder calculator on its website to help farmers establish how much fodder they need and the associated costs.