Teagasc New Entrants Training Abigail Ryan Teagasc Moorepark

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  • Slide 1
  • Teagasc New Entrants Training Abigail Ryan Teagasc Moorepark
  • Slide 2
  • Overview Why? Money in Money out Investments Personal Cash flow
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  • Why? Money in Money out Investments Personal Cash flow
  • Slide 4
  • Why? because it will cost a lot of money Existing farmers 2020 Vision 50% increase in volumes ICBF Projections on Cow Numbers - +100k in Glanbia?? Possible Cost of on-farm Investment 2,000/cow = 200m 4,000/cow = 400m New Entrants 50% are currently beef farmers Average investment 160,000 approx. Target a yield of 385kg (1,100 gallons) per cow + 10 c/litre profit
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  • Why? Money in Money out Investments Personal Cash flow
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  • Average Producer Milk Prices 2 c/litre
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  • Average Producer Milk Prices 2 c/litre 6 c/litre
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  • Source: CSO Average milk price : 2008 : 33.2 c/litre ; 2007 : 33.5 c/litre Monthly Milk Prices (vat incl.)
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  • Source: CSO Average milk price 2008 33.2 c/litre : 2007 33.5 c/litre Aut 07 Spr 08
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  • Milk price variation vs milk sales Milk price Milk receipts (/100 cows) 22 c/litre110,000 28 c/litre140,000 34 c/litre170,000 Variation 60,000 per 100 cows
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  • Why? Money in Money out Investments Personal Cash flow
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  • Range in Physical & Financial Performance 2010 Top 1/3 Middle 1/3 Bottom 1/3 Concentrate (kg/cow) 728961 1194 Days at grass234230 217 Money Out Costs (/cow) 1,0161,1311,300 Variation 28,400 per 100 cows
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  • Range in Physical & Financial Performance 2010 Top 1/3 Middle 1/3 Bottom 1/3 Milk Yield (litres/cow) 5,0035,051 4,729 Milk Solids (kg/cow) 355 322 Money In Output (/cow) 1,6311,5561,390 Variation 24,100 per 100 cows
  • Slide 14
  • Range in Financial Performance 2010 Top 1/3 Middle 1/3 Bottom 1/3 Money In Gross output (/cow) 1,6311,556 1,390 Money Out Costs (/cow) 1,0161,1311,300 Residual cash (/cow) 61542490 Variation 52,500 + per 100 cows
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  • Residual cash(/cow) - left to pay yourself, taxation and repay the investments Money In Top 1/3 Middle 1/3 Bottom 1/3 Money Out Top 1/3 615 Middle 1/3 424 Bottom 1/3 90
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  • Residual cash (/cow) - left to pay yourself, taxation and repay the investments Money In Top 1/3 Middle 1/3 Bottom 1/3 Money Out Top 1/3 615540374 Middle 1/3 482424259 Bottom 1/3 33125690
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  • Why? Money in Money out Investments Personal Cash flow
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  • Average investment costs /cow Stock1,400 Milking facilities1,000 Paddocks, Roadways500 Soil fertility / reseeding300 Slurry storage200 Winter accommodation350 Machinery / other housing250 Total4,000
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  • Possible investment costs Low cost Average High cost Stock-1,400 Milking facilities1,000 1,500 Paddocks, Roadways250500 Soil fertility / reseeding-300 Slurry storage200 1,000 Winter accommodation300350800 Machinery / other housing250 500 Total2,0004,0006,000
  • Slide 20
  • Possible investment costs Low Cost (/cow) Average (/cow) High cost (/cow) Total Investment costs 2,0004,0006,000 Assumptions 10 year repayment period 6% interest rate Annual repayment/cow 274548822
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  • Residual cash (/extra cow) - left to pay yourself and for taxation Investment costs 2,000 per cow 4,000 per cow 6,000 per cow Residual cash High profit 34167- 448 Average 208- 124- 563 Low profit 57- 292- 732
  • Slide 22
  • Expansion a case study End of year nos 060708091011 Dairy Cows48657795104110 Repl. (0-1) 243227554650 Repl. (1-2) 282432233046 Cattle (LU) 25.321.32.44.200 St. rate (LU/ha) MP SR 1.81 (1.81) 1.94 (2.14) 1.89 (2.68) 2.25 (3.18) 2.6 (3.55) 2.7 (3.68) Milk quota (000 litres) 249345416477480592
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  • Case study the investments made (000s)06/07080910/11Total Quota14.716.612.216.860.3 Buildings19.016.512.280.3128.0 Machinery9.4-1.827.738.9 Infrastructure-3.7-- Total43.136.826.2124.8230.9
  • Slide 24
  • Case study the investments made (000s)06/07080910/11Total Quota14.716.612.216.860.3 Buildings19.016.512.280.3128.0 Machinery9.4-1.827.738.9 Infrastructure-3.7-- Total43.136.826.2124.8230.9 Expansion costs 3,700/cow
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  • Case study the profit generated 20062007200820092010 Milk price c/litre 28.638.036.125.433.3 Common Cost /cow 892781757688788 Common Profit /cow 6291,215940548981 /farm (000s) 30797252102
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  • Lessons from Case Study Efficient dairy farms Can deliver a good income independent of SFP Can increase income through expansion But are affected by low milk price
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  • Why? Money in Money out Investments Personal Cash flow
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  • Living Expenses for Farm Families A consumption unit needs 11,400 A consumption unit = 13+ years Less than 13 years = unit 2 adults and 2 children = 34,200 Average farm family (in 2000) 3.56 persons or 3.2 units (36,400) What is the figure for your family?
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  • Why? Money in Money out Investments Personal Cash flow
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  • The transition to 2015 - Cash flow Pre-2015 Cost of rearing extra heifers The milk quota issue Timing of the investment Post-2015 Increasing cow number on milk receipts
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  • Dairy cow Suppliers per county CountySuppliers with Deliveries Carlow181 Cavan765 Clare682 Cork4293 Donegal238 Dublin32 Galway601 Kerry1707 Kildare158 Kilkenny916 Laois443 Leitrim54 Limerick1611 CountySuppliers with Deliveries Longford165 Louth199 Mayo430 Meath697 Monaghan680 Offaly367 Roscommon113 Sligo188 Tipperary1896 Waterford780 Westmeath323 Wexford798 Wicklow231 Total18548
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  • Compound annual growth in milk output %
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  • What % of live heifers calve at 22-26 months?
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  • Cash flow keeping extra heifers Cost /calf Calf retained on farm (vs calf sold)150 Cash cost of retaining the calf500 Estimate of direct cash costs650 65 per cow - 10% more heifers
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  • Cash flow - The milk quota issue % over quota Milk price +10%+ 30%+ 50% 34 c/l 31.427.424.4 28 c/l 25.421.418.4 22 c/l 19.415.412.4
  • Slide 37
  • Cash flow - Milk quota options Milk yield effect Cull 10% on 1 st September 100 litres per cow Reduce meals 500 kg / cow 250 litres per cow 30 day earlier dry off 300 litres per cow Sell 10% of herd next spring 500 litres per cow Once a day all next year 800 litres per cow Buy quota?
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  • Cash flow timing of the investment 2012201320142015 Stock Milking facilities Paddocks, Roadways Soil fertility / reseeding Slurry storage Winter accommodation Machinery ?
  • Slide 39
  • Cash flow effect of expansion on milk yield per cow Source: CSO
  • Slide 40
  • Cash flow effect of expansion on milk yield per cow Source: CSO More heifers Herd getting younger Herd maturing
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  • Cash flow effect of expansion on milk yield per cow Source: CSO Milk sales reduced by 300 per cow until herd starts to stabilise again
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  • Cash flow ongoing investment costs Cost /ha Cash reseeding costs650 Cash cost of retaining the calf500 Estimate of direct cash costs650 65 per cow - 10% more heifers
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  • Successful farmers the team approach Adviser AI technician Banker Contractor Co-op person Family Milking machine technician Vet
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  • Risk analysis Issue Likelihood (Chance of it happening) Impact (Effect on your business) Score (Effect on your business) Milk price Cost of production Level of investment Quota / super levy
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  • Risk analysis example farm Issue Likelihood (Chance of it happening) Impact (Effect on your business) Score (Likelihood X Impact) Milk price4 Cost of production 2 Level of investment 2 Quota / super levy 2
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  • Risk analysis example farm Issue Likelihood (Chance of it happening) Impact (Effect on your business) Score (Likelihood X Impact) Milk price45 Cost of production 24 Level of investment 23 Quota / super levy 25
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  • Risk analysis example farm Issue Likelihood (Chance of it happening) Impact (Effect on your business) Score (Likelihood X Impact) Milk price4520 Cost of production 248 Level of investment 236 Quota / super levy 2510
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  • Risk analysis example farm Issue Likelihood (Chance of it happening) Impact (Effect on your business) Score (Likelihood X Impact) Milk price4520 Cost of production 248 Level of investment 236 Quota / super levy 2510
  • Slide 49
  • Your next steps Establish your position Profit Monitor Complete the worksheet Update your 5 year plan