The real value of incomes on all farms has been “eroded” because of the high rate of inflation and dairy farmers today (Tuesday, July 7) were warned at the 2023 Moorepark Open Day to “refocus on financials”.
Attendees at the open day in Fermoy, Co. Cork heard that focusing on financials and cost controls is essential to “protect farm margin”
During the event it was also highlighted that the “greatest immediate challenge for Irish dairy farms is to secure an adequate household income for farm families”.
Teagasc has estimated that net margins on Irish dairy farms increased by 70% to €3.20 per kg fat plus protein (23.9 cent per litre) in 2022.
It said this resulted in an average family farm income of €151,000 per farm.
But it has warned that this will not be repeated in 2023 because “milk prices have already reduced to 2021 levels”.
Cost controls
During the Moorepark Open Day Padraig French, dairy enterprise leader at Teagasc, Moorepark, highlighted how the profitability of dairy farms had evolved in recent years and looked at the key performance indicators that could increase profitability.
Attendees at the event were only too aware that feed costs for dairy farmers have remained high during 2023 – estimated to be in the region of 75% on 2020 costs – and that together with rising interest rates there will be likely be a “tightening” of cash flow on farms this year.
They also heard that the average net margin per litre of milk is expected to fall to “€1.50 per kg fat plus protein (12-14 cent per litre)” in 2023.
Therefore in order to maintain profit margins Irish dairy farmers must refocus on cost controls during 2023.
Central to increasing economic performance in grazing systems is increased pasture utilisation (t dry matter (DM)/ha).
Efficient pasture-based systems must therefore maintain a high proportion of grazed pasture in the animal diet to achieve a low production cost-base, and to insulate the dairy farm business from both climate and imported feed price shocks.
An overall target of 70% grazed pasture in the dairy herd diet is appropriate in Irish grazing systems to achieve high levels of performance within a low cost grazing system.
This equates to approximately 265 days of grazing and 0.5t of concentrate fed/lactating cow/annum.
Margins
At a general level, multiple prices should be sought when sourcing farm materials during the remaining months of 2023 to take advantage of any market price reductions.
More specifically, reduces feed costs as well as costs related to pasture and forage are an
essential objective to constrain total production costs in 2023 as fertiliser prices reduce and
increased use of clover in swards reduces total N fertiliser requirements.
Stocking rate
Whether the objective is minimising external feed and capital costs, reducing workload or
minimising environmental impacts, having the correct stocking rate (SR) has always been a
cornerstone of efficient and profitable grazing systems.
Recent trends for SR on Irish dairy farms reveals that overall SR has increased only modestly during the last decade from 1.9 to 2.1 livestock units/ha.
But based on available national statistics, milking platform SR has increased from 2.0 to 2.7 LU/ha during the last decade.
In defining the optimum SR, it must first be acknowledged that farms differ in terms of land quality and usability, cow type/size, milking platform area and the availability of outside
land blocks.
Nonetheless, pasture production, pasture utilisation and concentrate supplementation levels are the primary considerations that define the optimum SR to allow both high animal performance and high pasture utilisation to be achieved.
According to Teagasc farmers should exercise caution with marginal SR increases as additional pasture utilisation is not guaranteed and the overall economic benefit is heavily dependent on favourable economic conditions.
For these reasons, previous studies in pasture-based systems have reported a linear decline in
profitability with increasing feed importation.
In addition, many studies also indicate that where increased SR is associated with increased chemical fertiliser and supplementary feed importation, nutrient-use efficiency is reduced, resulting in increased nutrient losses to the general environment.
Dairy exports
The Irish dairy sectors exports are the largest single element of total food and drink exports, with over 1.7 million tonnes of product shipped to over 130 markets worldwide.
With a total estimated value of €6.8 billion in 2022, the year-on-year increase in value alone was worth €1.7 billion to the Irish economy.
According to Teagasc, the sustained recent performance of the sector has been achieved through a 33% increase in product value, together with a 20% increase in total milk output since 2017.
Although herd expansion has been one feature of this change, with average herd size increased from 75 to 93 cows/farm in this period.
The success of the dairy sector has come primarily from increased productivity, through improved animal breeding, grassland management and animal husbandry.
The focus for dairy farmers -while also keeping an eye on the future of their farms – should be prudent financial management; achieving appropriate stocking rates (SR); and simplifying workloads to achieve a sustainable work-life balance on-farm.