Four in ten ignorant of supply costs
More than four out of every ten dairy farmers don't know how much it costs them to produce a gallon of milk. That's one surprising statistic that emerged from a survey of their milk suppliers by Glanbia published last week. Almost 1,000 of the 2,650 of Glanbia's 5,181 suppliers who responded to their survey said they were unaware of the cost of producing their own milk. Apart from clearly identifying the need of many dairy farmers for assistance with financial planning, the survey provides a useful snapshot of the mood of the dairy industry post decoupling.
Overall their outlook is positive. Almost three-quarters plan to remain in dairying. But this largely depends on them getting more quota. For dairy farmers, despite all the changes in the CAP since Ireland joined the EU forty years ago, the message hasn't changed to continue to survive they must continue to expand.
While the average quota of Glanbia suppliers now stands at 55,000 gallons, the majority of suppliers want to increase this by an average of 52%. As Glanbia Group Managing Director, John Moloney pointed out at the launch of the findings, this target is not currently feasible without significant changes to the quota re-structuring scheme.
A majority of dairy farmers expressed themselves as being unhappy with the current arrangements for transfer of quota. Glanbia has already met the Minister for Agriculture and Food, Mary Coughlan, and proposed a quota restructuring system which allows 70% of an exiter's quota to be sold through a milk quota exchange. The other 30% would continue to be sold through the re-structuring scheme at reducing prices over a period of three years, (from 0.75c in 2005 to 0.50c in 2006 and 0.25c in 2007).
In contrast to the effect of decoupling on other farmers, which is predicted to result in a reduction of 10% in national livestock numbers, the size of the financially viable dairy herd continues to increase. The availability and cost of quota are not the only restrictions on growth. There's the spiralling cost of land and the reducing availability of labour. There's also the question as to whether there will ever be an end to the need to continually increase production? How many cows will a farmer's son or daughter have to milk in 2050? Thousand-cow herds are not uncommon in the US and recently we hear of herds that are ten times that size. While, given the structure of Irish agriculture, such numbers are unrealistic, it should be remembered that the Irish dairy industry is renowned for its grass based milk production. And, as statistics from other countries and plain common sense tells us, if you continue to increase herd size you eventually reach a point where the herd can no longer be managed at grass. Eventually you end up, as in the US, running a factory rather than a farm.
While expansion of production is the aim of most of the respondents to the survey, the Nitrates Directive is a potential obstacle to their future plans. Glanbia found that up to 25% of respondents would have to destock by 28% of their livestock units if the 170 kgs N/Ha were introduced. And even if the limit was set at 210kg N/Ha one in ten of their suppliers would be affected. Glanbia has called for the nitrogen limit to be raised to 230kgs N/Ha but it's unclear how acceptable this will be in Brussels.
What the survey does show is that a significant percentage of dairy farmers run their business on a wing and prayer and try to keep as far away from book work and business plans as possible. Findings indicate that, in contrast to the huge amount of discussion that has taken place in the media for years about its implication, four out of every ten respondents hadn't yet studied the impact that the Nitrates Directive would have on their farm. Interestingly, this is the same number as those who admitted they didn't know the cost of their own milk.
Irish farmers tend to work alone and greatly value their independence, yet over 1,000 Glanbia suppliers expressed at least a partial interest in considering the possibly of Milk Production Partnerships. While current partnership rules are seen as too restrictive, given the increasing scarcity of labour, this may well turn out to be the best way forward for many milk producers.
There is no doubt that the recent CAP changes have reduced some of the uncertainly that surrounded farming and dairy farming in particular. Farmers have a better idea of where they stand, at least for the next decade. This is reflected in the survey which showed that while 14% of the respondents had yet to decide whether to continue in milk production, only a tiny percentage- comprising just 50 dairy farmers were planning to give it up.
Like all recent studies of Irish farmers, the survey shows that since we first joined the EU, several trends have remained unchanged. The age profile of Irish farmers gets older, the numbers of farmers and those working on the land decreases and increasing numbers of farmer's potential successors are being attracted to other forms of employment.
What hasn't changed either in the last 40 years of membership is the need for dairy farmers to continually increase production to survive.
