Existing dairy farmers need more support
A few years ago, huge emphasis was being put on the advantages of scale.
Some researchers, farm leaders and other commentators were giving the impression that rapid increases in cow numbers would be required, and farmers would require well over 100 cows to be viable after quotas.
Teagasc and co-ops set up greenfield dairy units with 200-300 cows. Yet most of our milk is produced by family farms — and hopefully that will continue.
The costs of large scale dairy expansion or big startups are very high. No short cuts can be taken (many have reservations about outdoor wintering pads, and topless cubicles are a crazy idea).
With improvements in technology and breeding and the continuing increase in the number of well-bred dairy heifers, the least of the problems in increasing milk production by 50% will be at farm level — if milk prices and finance availability are favourable.
The target to increase milk production 50% from 2015 to 2020 has been written about extensively and discussed at farmers’ conferences. To date, the summary of the discussions and debates seems to suggest that the target of 50% can be achieved, but a lot will depend on milk price.
Most banks are using a price of around 30 cents per litre for lending and budgeting purposes.
Forecasts are based on increasing world demand for dairy products, and limiting potential for milk expansion in many countries.
The present relatively high price is largely due to difficulties with Chinese production, which are likely to last for another few years. It is difficult for me to imagine that the Chinese can make much of an impression on their growing demand for dairy products, from what I have seen of Chinese production.
There will be price volatility due to changes in world market prices, which are very difficult to predict. It is because of that price volatility that farmers should be very careful with borrowing, and must operate at a high level of efficiency.
Analysis of National Farm Survey data here in Ireland shows that, given the infrastructure that exists on farms and expected gains in productivity per cow, the existing population of dairy farmers could increase national milk production by well over 50% by 2020. However, when anticipated farm exits from milk production and costs of expansion are considered, this figure falls to between 20% and 40%.
Increases in milk production do not always mean increases in cow numbers. Milk production is on average more than 25% under the genetic potential of our cows, even on good grass-based systems with moderate concentrate. In Norther n Ireland, milk production per cow has increased by over 25% during the past few decades, from an already relatively high level. Much of this improvement came from extra concentrates, but in southern Ireland, most of the increases in output per cow can potentially come from better use of our grassland.
I feel that we could maintain the vast majority of our current family dairy farms, with a fairer, front-loaded distribution of the new CAP to help efficient small/medium size dairy farmers to stay in business and expand. This is unlikely to happen, because of pressure on the Department of Agriculture to support bigger and fewer dairy farms. The distribution of the new CAP, especially the “green-ing” element, is a clear indication of where Minister Coveney is taking his advice from. He is not following through on his promise to give priority to family farms.
In the past five years, about 500 stand-alone new entrants have received about 44,000 gallons of free quota each from the new entrants ’ scheme. But very little has been done to help small to medium sized family dairy farmers to expand.
It is far more economical to expand production from existing, efficient farms than start up new units. Unless substantial funding is already available, borrowing for new startups is not usually practical.
The most important practice over the past few years was to be ready for expansion after 2015 by having healthy herds and high-quality replacements, with high-quality pastures.
Jumping the gun too soon has been costly, and has caused a lot of anxiety.
Some farmers have already expanded far beyond their available quotas, and even without paying super levy, this is costing them a lot of money in terms of very short lactations, under-feeding, over-culling, and late lactations.
Data from ICBF indicate that dairy calvings increased significantly over the last few years.
This increase in dairy breeding is likely to cause serious over-quota problems this year, but will be a great asset for the future.
