Profit per hectare wins out over profit per litre on dairy farms – Teagasc
The top profit per hectare dairy farms generated an average gross output of €6,091/ha, which was €1,147/ha higher, compared to the top profit per litre farms in 2014, Teagasc research shows.
Its e profit monitor report on Irish dairy farms for 2014 shows that the higher output was achieved by virtue of the higher milk solids production per cow and higher stocking rate.
Part of the output advantage of the top profit per hectare farms was lost due to their higher variable costs per hectare and per litre, attributed in part to their lower grass utilisation per cow.
However, gross margin for the latter category was still €728/ha but due to a combination of lower gross output and higher variable costs their gross margin per litre was 1.32c/L lower per litre.
The Teagasc figures also confirm that high net profit per hectare farms had higher fixed costs per hectare and per litre (€263 and 0.25c respectively). While net profit per litre was 7% lower (1.58c) on the high net profit per hectare farms, net profit per hectare was 14% higher (€464).
The implications of these findings for dairy farming without the restrictions of milk quota are that the more profitable farms are those:
- Higher stocked farms still growing and utilising large quantities of grass
- Delivering high output – large quantities of high value milk solids per cow and per hectare (in excess of 440 and 1,150 kilos respectively) and;
- Operating at relatively low but not necessarily the lowest cost.
The key figures generated by the e-profit monitor analysis comparing profit per hectare versus profit per litre on Irish dairy farms are as follows: