The Irish Farmers’ Association (IFA) has undertaken a cost benefit analysis of the various milk price incentives offered by dairy processors to encourage farmers to supply more milk during off peak months.
According to the IFA, five processors offer out-of-season bonuses for milk supplied over the winter period, covering the months of November to February.
This analysis shows that some of the actions required to achieve these bonuses are costly and, in some cases, outweigh the return.
Dairy
IFA Dairy Committee chair Martin McElearney said that farmers need to analyse the full costs and benefits of chasing these so-called bonuses.
“A flatter milk supply curve works for processors as they make more efficient use of their plants, but does it make sense for farmers? This analysis attempts to answer that question,” he said.
These scenarios depict five typical ways in farmers might alter their production system to increase milk supply in winter.
Among the key findings in the report are that “altering the calving pattern to avail of out of season bonuses will increase the annual cost of supplementary feed”.
“The additional costs of labour, silage and the cost of running the parlour over the winter erodes the additional revenue from milk collected over the winter period.
“One could consider milking late calvers through the winter when the base price of milk is high and the cost of meal is competitive.
“Milking through the winter has the least disruption to the annual feed budget while also maximising total milk revenue.
“This does not disrupt existing calving patterns and can be decided to pursue at relatively short notice,” the report stated.
Bonuses
McElearney encouraged dairy farmers to study the various scenarios set out in the document, which is available on the IFA website.
“These incentives offered by processors may appear lucrative at first glance. However, the analysis shows that they can be significantly eroded by the additional costs associated with flattening milk supply on farms.
“Everybody’s circumstances are different and it is for each farmer to make the right decision for their farm and for themselves,” he said.
“Ireland has a natural advantage in our grass growing season. Farmers structure their farming system to maximise the amount of milk we can produce from grass.
“While this poses seasonality challenges for processors, farmers need to do a full analysis for their farm before changing their system to chase incentives,” he added.
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