Dairy farm profitability down at least 11%

A decline of 11% in profitability in 2015 has been indicated on leading dairy farms.

However, the loss of profitability is likely to be greater across dairy farming, because the profitability estimate comes from early completers of Teagasc e-Profit Monitors, who tend to be the most financially focused and efficient dairy farmers.

A sample of 200 spring milk dairy farms who completed the Monitor in early January was analysed, to compare the physical and financial performance of the farms in the first year of EU milk quota removal.

George Ramsbottom of Teagasc has reported that the results showed milk yield and composition increased substantially.

Herd size also increased, and costs of production declined substantially in 2015 on the sample farms.

But lower milk prices resulted in an overall decline in profitability.

Reflecting in part the 13% increase in average herd size, milk production on the sample farms increased by more than 136,000 litres (24%).

Practically all of this increase in production was sold rather than fed on the farms — showing that farmers exploited the opportunity conferred by quota removal to sell more milk.

Substantial increases in milk fat and protein content also occurred, with the combination of greater milk production per cow and higher constituents resulting in a 41kg increase in milk solids production per cow.

Despite increases in fat and protein content, the milk price declined by more than 8c/litre.

Total farm gross output changed little, although milk sales declined by €250 per cow.

Efficiency gains in production costs resulted in variable and fixed costs per litre declining by 10% and 14% respectively in 2015 (worth almost €60 per cow).

This was due in part to post-quota increases in milk yield per cow, and possibly also reflected excellent September to November grass growth in most parts of the country.

Increases in dairy herd size resulted in higher total costs per farm.

This resulted ultimately in an €11,000 decline in dairy net profit achieved per farm in 2015, according to Mr Ramsbottom.

He explained that dairy net profit goes to pay the dairy farmer for his own labour, taxation commitments, and loan principal repayments, exclusive of the profit margin that may be generated by other enterprises on the farm, and of single farm payments.


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