Cash surplus halved for dairy farmers
Analysing the records of those farmers achieving the highest surplus cash per cow, Jim concluded that they not only had good milk receipts, but they also had significant income from animal sales, while maintaining good control on costs.
High-performing dairy farmers were looking at a cash surplus after nine months of 2023 of €700 per cow, to pay for the farm family’s labour and drawings, in addition to tax and repayments.
“That’s coming back from about €1,550 as the equivalent figure 12 months ago, in 2022, so we’re less than half of last year’s figure in terms of surplus per cow”, said Teagasc dairy adviser Jim Moyles, when he discussed the financial performance of dairy farms in 2023 in a recent Dairy Edge podcast.
Jim’s data were drawn from farm accounts for 27 farms from January to the end of September 2023, with a big range in costings among the 27. Those farmers were not representative of the national average.
Jim considered that they were high performers, representative of the top 25-30% of dairy farmers in terms of their technical efficiency.
Their average six-week calving rate would have been 80%, and last year they would have been producing 500kgs of milk solids per cow per annum.
Their average herd size was 156 cows. Milk receipts, stock sales and all costs, as well as dairy cow replacements, are factored into the costings, but no direct farm payments are included in the calculations of the cash surplus figure. A depreciation figure, or opening and closing livestock inventories, are also not included.
Milk price
Similar time periods in 2022 and 2023 were compared in terms of milk receipts. “The milk price this year, across the 27 farms, was 43.1 cents per litre, and the equivalent for the eight months of 2022 was 58 cents per litre.”, Jim explained.
Hence, a drop of about 15 cents per litre has been recorded in the first eight months of 2023, amounting to a 26% drop. The situation deteriorated further in the meantime.
Jim estimates a drop of €800 in milk receipts per cow for the first nine months of 2023, whereas in the first nine months of 2022, each cow earned an average of €2,900 in milk receipts, that figure has been reduced by €2,100 in a similar period in 2023, notwithstanding similar milk production per cow.
By the end of 2023, Jim estimates that production per cow over 12 months will be somewhat reduced compared to last year, mainly because of bad weather conditions which means that cows will not be on grass for as long.
The nine-month analysis does not show a big increase in variable costs in 2023, coming in at €1,100 per cow, more or less on a par with last year. Meal was the most significant variable cost.
Costs
Meal costs are up about €30 per cow in the first nine months of 2023, compared to the same period last year, although cows were fed more or less the same amount of meal, averaging about 0.9 tonne of meal per cow.
However, meal prices have been gradually declining during 2023. Fertiliser is the other big variable cost, and its cost has reduced in 2023, but those farmers who purchased at the beginning of the year lost out.
The average cost of fertiliser per cow now, for the first nine months of the year, is reduced by €75 per cow compared to 2022, Jim said. However, that saving was cancelled out by small increases across most of the other variable costs.
The cost of “herd improvement” increased by about €13 per cow in 2023. This is probably due to the increased use of sexed semen and synchronisation protocols. “Overall, variable costs held very steady”, Jim said.
Fixed costs
Similarly, fixed costs changed little in 2023. They increased by about €60 per cow, Jim said. The cost of hired labour reduced a little, from €69 per cow in 2022 to €62 in 2023.
The cost of electricity has increased by about €20 per cow in the first nine months of 2023, to €60, compared to the same period in 2022. Back in 2021, electricity only cost €30 per cow.
For the first time, land rental was included in the nine-month review, and it averaged €100 per cow for the first nine months of the year.
In the survey group, some are paying €150 per cow for land rental, amounting to €30,000 per farmer in some instances. The third highest fixed cost, after feed and fertiliser, are bank repayments, which have not varied since 2022. “They’re working out at €175 per cow both years”, Jim said.
“When you add the variable and fixed cost together, they’re about €1,700 per cow after nine months”, Jim said.
While an average cash surplus of €700 per cow was recorded in the study, this covers a large range of outcomes. Whereas the most successful farmer surveyed had a cash surplus of €1,300 per cow after nine months, at the other end of the spectrum, the lowest had a deficit of minus €17 per cow.
Good control
Analysing the records of those farmers achieving the highest surplus cash per cow, Jim concluded that they not only had good milk receipts, but they also had significant income from animal sales, while maintaining good control on costs.
Their feed and fertiliser costs were more or less on a par with others, but they tended to have relatively very low fixed costs.
They had low machinery rental costs, very low land rental outlay, and were not over-extended in terms of bank repayments and loans. Some of the bigger farmers work at a scale that enables them to procure some inputs at reduced rates.
Some of the smaller farmers intend to band together in purchasing groups to reduce their input costs.
