According to Teagasc, total production costs are up by 56% since 2015, with feed costs up by 100%, which has made things difficult for farmers.
These costs are becoming harder to deal, with as this year we saw a tough wet spring, followed by poor grass growth further into the growing season which hindered cow’s peak milk production.
An accumulation of poor weather and poor milk price with costs higher than ever has flattened farmers this year with a lot of farmers seeing a hit in profits and margins.
A cost session was held at Teagasc Moorepark where Laurence Shalloo and Patrick Gowing analysed the numbers of the participating groups.
Production costs
Shalloo and Gowing gathered information from around 700 farms with clear messages emerging when comparing high versus low margin farms.
The analysis found that there was a huge range in farm profit, with the top 10% being €500/cow ahead of the average and the bottom 10% being €500/cow below the average in 2023.
It is important to be able to understand what the higher margin farms were doing to sustain a higher margin, particularly this year as margins are tight.
Higher margin farms had the following:
- €250/cow lower variable costs;
- €300/cow lower fixed costs;
- Had tighter cost control across nearly all categories;
- Produced 70kg/milk solids/cow more for less purchased feed input;
- Utilised more pasture/ha and achieved higher grass intake per cow.
The variability in costs was said to be the striking feature of the day, with overall farm performance having a serious impact on profits from the farms.
The difference in net margins and profits was down to various decisions being made on farms and was not down to the location or the soil type.
The underlying drivers of cost and profit should be regularly examined particularly with the tight margins we are seeing on many farm across the country in 2024.
A dairy farm needs to aim to be sustainable in surviving milk price drops while being profitable when milk price is high, while being sustainable across all the key performance indicators (KPIs).
There is significant potential to increase your productivity and efficiency at farm level when compared with the average farm across the country.
The focus at farm level must be about increasing grass growth and utilisation and converting that feed to milk solids sales in as low a cost as possible. Grass is the cheapest feed available so utilising it is as much possible has a huge impact on profits and costs.
Converting to a more simplified system by increasing your labour efficiency by using more streamlined work practices, using contractors, contract rearing your heifers will all have a huge impact on labour costs.
Driving your profitability per hectare needs to be a farm focus and that may require you to decrease your labour requirements, finding your optimal stocking rate and utilising as much grass as possible in your system.
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