A Teagasc economist has warned that changes in European Union and world trade policy will lead to continuing income pressure in dairy farming.
Addressing the Teagasc Dairy Conference in Killarney, economist Trevor Donnellan said that farmers who are committed to continuing in dairy farming must grow their business and adopt the most effective cost cutting methods.
He said that huge emphasis must be placed on cost-efficiency because under current quota policy, the limited amount of quota becoming available will not allow sufficient expansion in milk production to maintain income.
Mr Donnellan said many farmers have too many cows, which is leading to production inefficiencies.
Radical change in dairy industry structure
Teagasc dairy specialist, Tom O'Dwyer, told the conference that the difference in cost between the lowest and highest cost milk producers is eight cents per litre. This amounts to a massive €15,000 per year in lost income on many dairy farms.
Mr O'Dwyer said that the structure of the Irish dairy industry has changed radically during the past two decades. The number of dairy farmers has dropped from 63,000 in 1983 to 26,000 today, a drop of over 4% per year. In 2001, almost 1,200 farmers ceased milk production. He said the average dairy herd is now 47 cows.
Survey shows research being implemented
A survey by Teagasc adviser, Billy Kelleher has indicated that committed dairy farmers are actively implementing the organisation's research findings.
Mr Kelleher said new grass management blueprints developed at Moorepark have already been implemented by 60% of the farmers surveyed. The remaining 40% are in the process of implementation. Re-seeding land with improved grass varieties has a major impact on milk output and cost.
He said the results of research at Moorepark on critical management practices for improved fertility have been applied on 55% of farms and a further 45% are currently putting these practices in place.
New farming investment same as quarter of farm income
Sean Regan, Chief Environment Adviser with Teagasc, told the conference that net new investment in farming last year was equivalent to one-quarter of farm income.
Borrowing by farmers has almost doubled in the past five years, from €1.6bn in 1995 to €3.1bn in 2001, and bank interest payments now account for over 10% of farm income.
Mr Regan said that while dairy farms account for less than 30% of farms, they contributed well over 50% of total new investment in 2001. Almost 80% of dairy farmers made capital investments last year, compared to just 36% of cattle farms.
NZ farmers combat decreasing margins by increasing scale
The conference was also told that milk output per farm in New Zealand has increased by 250% during the past 15 years.
John Roche, a senior research scientist in New Zealand, said that farmers have counteracted decreasing margins by increasing scale.
He said the rapid expansion of milk production has been made possible by conversion of traditional sheep, beef and tillage land to dairying.
