Download ppt - Teagasc New Entrants Training Abigail Ryan Teagasc Moorepark

Teagasc New Entrants Training

Abigail Ryan

Teagasc Moorepark

Overview

• Why?

• Money in

• Money out

• Investments

• Personal

• Cash flow

• Why?• Money in

• Money out

• Investments

• Personal

• Cash flow

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

• Why?

• Money in• Money out

• Investments

• Personal

• Cash flow

Average Producer Milk Prices

18

20

22

24

26

28

30

32

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06

c/ litre 2 c/litre

Average Producer Milk Prices

18

20

22

24

26

28

30

32

34

36

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

c/ litre 2 c/litre

6 c/litre

20

25

30

35

40

45

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

cen

t p

er

litre

2008 2007

Source: CSO

Average milk price : 2008 : 33.2 c/litre ; 2007 : 33.5 c/litre

Monthly Milk Prices (vat incl.)

Monthly Milk Prices (vat incl.)

0

2

4

6

8

10

12

14

16

Jan Mar May Jul Sep Nov

% o

f p

rod

uct

ion

20

25

30

35

40

45

cen

t p

er

litre

Supply 2008 Price 2007

Source: CSO

Average milk price 2008 33.2 c/litre : 2007 33.5 c/litre

Aut 07Spr 08

Milk price variation vs milk sales

Milk priceMilk receipts (€/100 cows)

22 c/litre €110,000

28 c/litre €140,000

34 c/litre €170,000Variation €60,000 per 100 cows

• Why?

• Money in

• Money out• Investments

• Personal

• Cash flow

Range in Physical & Financial Performance 2010

Top 1/3

Middle 1/3

Bottom 1/3

Concentrate (kg/cow) 728 961 1194

Days at grass 234 230 217

Money Out Costs (€/cow) €1,016 €1,131 €1,300

Variation €28,400 per 100 cows

Range in Physical & Financial Performance 2010

Top 1/3

Middle 1/3

Bottom 1/3

Milk Yield (litres/cow) 5,003 5,051 4,729

Milk Solids (kg/cow) 355 355 322

Money In Output (€/cow) €1,631 €1,556 €1,390

Variation €24,100 per 100 cows

Range in Financial Performance 2010

Top 1/3

Middle 1/3

Bottom 1/3

Money In Gross output (€/cow) €1,631 €1,556 €1,390

Money Out Costs (€/cow) €1,016 €1,131 €1,300

Residual cash (€/cow) €615 €424 €90

Variation €52,500+ per 100 cows

Residual cash(€/cow)- left to pay yourself, taxation and repay the investments

Money InTop 1/3

Middle 1/3

Bottom 1/3

Money Out

Top 1/3 €615Middle

1/3 €424

Bottom 1/3 €90

Residual cash (€/cow)- left to pay yourself, taxation and repay the investments

Money InTop 1/3

Middle 1/3

Bottom 1/3

Money Out

Top 1/3 €615 €540 €374Middle

1/3 €482 €424 €259

Bottom 1/3 €331 €256 €90

• Why?

• Money in

• Money out

• Investments• Personal

• Cash flow

‘Average’ investment costs €/cow

Stock €1,400Milking facilities €1,000

Paddocks, Roadways €500Soil fertility / reseeding €300

Slurry storage €200Winter accommodation €350

Machinery / other housing €250Total €4,000

Possible investment costs Low cost

AverageHigh cost

Stock - €1,400 €1,400Milking facilities €1,000 €1,000 €1,500

Paddocks, Roadways €250 €500 €500Soil fertility / reseeding - €300 €300

Slurry storage €200 €200 €1,000Winter accommodation €300 €350 €800

Machinery / other housing €250 €250 €500Total €2,000 €4,000 €6,000

Possible investment costs

Low Cost

(€/cow)Average(€/cow)

High cost

(€/cow)

Total Investment costs €2,000 €4,000 €6,000Assumptions10 year repayment period6% interest rate

Annual repayment/cow €274 €548 €822

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

Resid

ual

cash

High profit €341 €67 - €448

Average €208 - €124 - €563

Low profit €57 - €292 - €732

Expansion – a case study End of year no’s ‘06 ‘07 ‘08 ‘09 ’10 ‘11

Dairy Cows 48 65 77 95 104 110

Repl. (0-1) 24 32 27 55 46 50

Repl. (1-2) 28 24 32 23 30 46

Cattle (LU) 25.3 21.3 2.4 4.2 0 0

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) 249 345 416 477 480 592

Case study – the investments made

(€‘000’s) ’06/’07 ‘08 ‘09 ’10/’11 Total

Quota 14.7 16.6 12.2 16.8 60.3

Buildings 19.0 16.5 12.2 80.3 128.0

Machinery 9.4 - 1.8 27.7 38.9

Infrastructure - 3.7 - - 3.7

Total 43.1 36.8 26.2 124.8 230.9

Case study – the investments made

(€‘000’s) ’06/’07 ‘08 ‘09 ’10/’11 Total

Quota 14.7 16.6 12.2 16.8 60.3

Buildings 19.0 16.5 12.2 80.3 128.0

Machinery 9.4 - 1.8 27.7 38.9

Infrastructure - 3.7 - - 3.7

Total 43.1 36.8 26.2 124.8 230.9

Investments made

€0

€20

€40

€60

€80

€100

€120

€140

pre 2008 2008 2009 2010 on

Expansion costs €3,700/cow

Case study – the profit generated

2006 2007 2008 2009 2010

Milk price

c/litre 28.6 38.0 36.1 25.4 33.3

Common Cost

€/cow 892 781 757 688 788

Common Profit

€/cow 629 1,215 940 548 981

€/farm (‘000’s) 30 79 72 52 102

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

• Why?

• Money in

• Money out

• Investments

• Personal• Cash flow

Living Expenses for Farm Families

A consumption unit needs €11,400

• A consumption unit = 13+ years

• Less than 13 years = ½ 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?

• Why?

• Money in

• Money out

• Investments

• Personal

• Cash flow

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

Dairy cow Suppliers per county

County Suppliers with Deliveries

Carlow 181

Cavan 765

Clare 682

Cork 4293

Donegal 238

Dublin 32

Galway 601

Kerry 1707

Kildare 158

Kilkenny 916

Laois 443

Leitrim 54

Limerick 1611

County Suppliers with Deliveries

Longford 165

Louth 199

Mayo 430

Meath 697

Monaghan 680

Offaly 367

Roscommon 113

Sligo 188

Tipperary 1896

Waterford 780

Westmeath 323

Wexford 798

Wicklow 231

Total 18548

Compound annual growth in milk output %

What % of live heifers calve at 22-26 months?

Number % Total1. Total number of dairy heifers born in 2007 249,126 100%2. Number that have calved at least once at this stage. 191,760 77.0% - Of these, how many calved at the target 22-26 mths 119,278 47.9% - Of these, how many calved at <22 months. 2,753 1.1% - Of these, how many calved at 27-30 months 22,363 9.0% - Of these, how many calved at 30 months+ 47,366 19.0%3. Number that have not calved or did not calve. 57,366 23.0% - Of these, how many are still on farm un-calved. 16,557 6.6% - Of these, how many died/culled at 1-28 days 9,585 3.8% - Of these, how many died/culled at 1-12 mths 7,893 3.2% - Of these, how many died/culled at 12-24 mths 5,796 2.3% - Of these, how many died/culled at 24 mths+ 14,649 5.9% - Of these, how many not calved and exported 2,886 1.2%

Cash flow – keeping extra heifers

Cost €/calf

Calf retained on farm (vs calf sold) 150

Cash cost of retaining the calf 500

Estimate of direct cash costs 650

€65 per cow - 10% more heifers

Cash flow - The milk quota issue

929

954 961

992

1030

860

880

900

920

940

960

980

1000

1020

1040

2008 2010 2012

Co

w n

um

ber

s ('

000'

s)

% over quota

Milk price

+10% + 30% + 50%

34 c/l

31.4 27.4 24.4

28 c/l

25.4 21.4 18.4

22 c/l

19.4 15.4 12.4

Cash flow - Milk quota options

Milk yield effect

Cull 10% on 1st 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 ?

Cash flow – timing of the investment

2012 2013 2014 2015

Stock Milking facilities

Paddocks, Roadways Soil fertility / reseeding

Slurry storage Winter accommodation

Machinery ?

Cash flow – effect of expansion on milk yield per cow

106

37

0

20

40

60

80

100

120

03 04 05 06 07 08 09 10

Ave

rag

e c

ow

nu

mb

er

Cow no

Source: CSO


5359

6331

4000

4500

5000

5500

6000

6500

03 04 05 06 07 08 09 10

Ave

rag

e m

ilk y

ield

Milk yield

Source: CSO

More heifersHerd getting younger

Herd maturing


106

37

5359

6331

0

20

40

60

80

100

120

03 04 05 06 07 08 09 10

Ave

rag

e c

ow

nu

mb

er

4000

5000

6000

Milk

yie

ld (

litre

s p

er

cow

)

Cow no Milk yield

Source: CSO

Milk sales reduced by €300 per cow until herd starts to stabilise again

Cash flow – ongoing investment costs

Cost €/ha

Cash reseeding costs 650

Cash cost of retaining the calf 500

Estimate of direct cash costs 650

€65 per cow - 10% more heifers

Successful farmers – the team approach

• Adviser

• AI technician

• Banker

• Contractor

• Co-op person

• Family

• Milking machine technician

• Vet

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

Risk analysis – example farm



Score (Likelihood X Impact)

Milk price 4

Cost of production

2

Level of investment

2

Quota / super levy

2





Milk price 4 5

Cost of production

2 4

Level of investment

2 3

Quota / super levy

2 5





Milk price 4 5 20

Cost of production

2 4 8

Level of investment

2 3 6

Quota / super levy

2 5 10





Milk price 4 5 20

Cost of production

2 4 8

Level of investment

2 3 6

Quota / super levy

2 5 10

Your next steps …

• Establish your position

– Profit Monitor

• Complete the worksheet

• Update your 5 year plan