The need for dairy farmers to develop a plan that aligns with financial and environmental objectives to adapt to reduced nitrates derogation limits has been highlighted by Ifac.
Dairy farmers in most areas around the country will have to achieve a stocking rate no greater than 220kg of organic nitrogen (N) per hectare for the year 2024 overall.
However, the longer the change is delayed, the more significant the actions may have to be for farmers to become compliant with the new nitrates rules, Ifac said.
This has financial implications that require careful consideration and strategic planning for many farmers, according to Ifac’s Irish Farm Report 2024 published today (Thursday, January 18).
Farmer survey
Over 60% of surveyed farmers who are affected by the nitrates cut said they are already within the 220kg N/ha, according to the report.
Of those who, as of November 2023 when the survey was taken, are not within the new limit, 13% said they will have to reduce cow numbers, and 9% will have to find additional land.
A total of 14% of farmers said they did not have a plan when they were surveyed between November and early December 2023, while 2% said they will use a contract rearer.
The survey does not indicate how far over the 220kg N/ha limit farmers are. Cases differ depending on what Band they are in, how efficient and profitable their farm is, and land availability.
Nitrates case study
To illustrate the potential impact on family farms, Ifac examined a 50ha farm with 114 cows yielding 5,500L of milk. The farm falls under Band 2 Nitrates Banding.
Thus, the permitted organic nitrogen increased from 89kg to 92kg/cow. Under new derogation rules, however, the overall farm limit will reduce from 247kg N/ha to 220kg N/ha.
Ifac’s financial analysis considers three options for farmers affected by the lower limit. These are: Reducing stocking rate to 220kg N/ha, leasing additional land, and contract rearing.
If cow numbers are reduced, farm profits could fall by 37%, assuming a linear cut of 14 cows. However, farmers will cull lowest-performing cows which will reduce the financial impact.
The case study shows that leasing additional land at €300/ac would result in a 12% drop in farm profits. Additional costs for cropping should be considered if the land is not used for replacement stock.
Contract rearing replacements could reduce viable costs by 16%, resulting in a 15% reduction in farm profits. The case study is based on contract rearing replacements for 540 days at €1.75 a day.
Financial management
Speaking to Agriland, head of farm support at Ifac, Philip O’Connor said that if a farmer had a very efficient herd, they could argue that any cull is going to impact them because all their cows are good.
Whereas, if their herd wasn’t at the higher end, they could argue that if they culled a few cows the impact on their profitability wouldn’t be as much, he added.
For some farmers meeting the new limit will be a cut in stock, for some farmers it will be getting extra land, if they can get it, and some farmers may look contract rearing, he said.
While everyone’s circumstance will be different in regards to what farmers can do, O’Connor stressed the importance of getting the stocking rate right on farm.
“Again, it’s back to financial management – look at your own figures, look at your own on-farm performance.
“It can’t just be a case of ‘yeah, I want to milk those extra 20 cows in home rented land without looking at any other figures’,” Ifac’s head of farm support told Agriland.
Financial institutions, considering the long-term impact of environmental changes, may stress the current limits to 170kg N/ha when assessing repayment capacity.
“It is crucial for each farmer to assess their unique circumstances and develop a plan that aligns with both financial and environmental objectives.
“Balancing the books in this evolving landscape requires strategic decision making and adaptability to secure the sustainability of Irish dairy farming,” Ifac said.