Carbery share model would boost expansion

Ireland’s dairy expansion goals would be hugely boosted if more co-ops adopted the active farmer-owned shareholding model used by Carbery, according to an agri-business consultant.

Michael Brady, managing director of the Cork-based Brady Group, said that co-ops could finance expansion by setting up a new company to process milk.

Carbery Group plans to align milk volume to shareholding for its milk suppliers in the Bandon, Barryroe, Drinagh and Lisavaird co-ops. This will address issues such as securing milk processing capability for expanding milk suppliers, and accessing shareholding value.

Mr Brady says that, with shares in most farmer-owned co-ops being valued at little more than €1 each, active farmers should be able to buy out the shares of inactive or “dry” farmers.

“They set up Reox schemes for property, why not set up a new company to process milk,” asked Mr Brady. “Carbery is a great model, with a majority of active farmer ownership. Most farmer co-ops’ shares have been worth around €1 for the last 100 years, so any change in ownership would have to be a plus for the shareholders.”

A member of the Agricultural Consultants Association (ACA), Mr Brady was involved in the launch yesterday of a new Ulster Bank survey showing that dairy (52%) and beef (40%) farmers’ output expansion plans are in line with Food Harvest 2020 ambitions.

The survey of 275 of ACA’s farming clients was conducted for the bank by Dr Pat Bogue of Broadmore Research. Planning 60% extra output by 2021, sheep farmers are far ahead of the FH2020 goal of a 20% increase.

Overall, however, Mr Brady said that farmers are less bullish now than they were in surveys conducted by the co-ops last year. For dairy, only the most efficient farmers will expand. Succession is also providing signs of both optimism and potential challenges.

Mr Brady said: “Farmers’ children are coming back from all over the globe with plans to take over the farm. Some of these are people who had ambitions to be overseas property developers, who are now lining up to get back into farming. There is a lot more interest in farm succession, but, with every new budget, Revenue is chipping away, taking more tax and making the transfer more difficult.”

Mr Brady welcomes farmers’ positive responses to the Ulster Bank survey. Some 56% of respondents have identified a successor, while another 26% are edging towards making a choice.

Some 17 out of 20 dairy farmers plan to increase milk output, with a 42% jump in cow numbers and 52% in milk output by 2021. By 2015, cow numbers will be up 22%, and milk output up 24%.

Just over 60% of beef farmers surveyed plan to increase stock numbers by an average of 69% by 2021, giving an overall national increase of 40%. The planned national increase in stock numbers by 2015 is 22%.

Just 6% of non-dairy farmers would consider converting to dairying when milk quotas are removed in 2015. Nine out of 10 farmers surveyed plan to invest in livestock, housing, slurry storage or machinery over the next three years.

Land availability, especially in dairy farming, and access to finance were identified as the main limiting factors to expansion. Nine out of 10 farmers plan to invest in livestock, housing, slurry storage or machinery. Funding will come from a mix of farm cash flow (41%), borrowing (38%), savings (14%) and off-farm income (7%).

Dr Ailish Byrne, senior agricultural manager with Ulster Bank, said: “These results show the progressive and commercial nature of today’s farmers which will drive expansion in output over the coming years. We are committed to supporting the needs and ambitions of the farming community. There is no substitute for talking directly to farmers to understand what matters to them, particularly in the current economic climate.”

In terms of funding the costs of processing an expanded milk pool, over 40% of dairy farmers would like to see a levy on milk produced in excess of current production levels, while just under 40% would prefer a levy on new producers.

In terms of boosting profits, some 90% of dairy farmers and 75% of beef and sheep farmers believe they can lift margins over the next three years. They will achieve this by cutting input costs and increased efficiency per acre.