Income gap between dairy elite and bottom 20pc hits €57,000

INCREASING production per ha while reducing costs has been identified by Teagasc as the key to a six-fold profit difference between the top 20pc of dairy farms and the bottom 20pc, reports Martin Ryan

The Farm Management Survey 2015 showed that while the top 20pc of specialist dairy farms earned an average of €68,216, profit levels for the bottom 20pc came to €11,591 – a difference of almost €57,000.

The Teagasc team found that the dairy farmers that achieved the highest profit per hectare had higher stocking rates, fed less concentrates per cow and achieved higher milk production per cow.

In addition, these farmers had cows on grass for 26 days longer during the year, had a greater proportion of the total farm area allocated to the grazing platform, and achieved higher grass utilisation per hectare.

The area farmed was similar for both groups studied, with an average of 51ha for the high earners, against 53ha for the low income operators – the milking platform area was 32ha and 36ha respectively.

However the top 20pc of the farmers had 78 cows on average producing 5,542 litres of milk per cow, compared to the lower-income farmers who had 62 cows on average yielding 4,781 litres.

The average stocking rate on the high performing farms was 2.23 cows/ha, compared to 1.69 cows/ha on the lower-income holdings. The higher stocking rate was possible because the high-income farms produced 50pc more grass.

Protein was higher on the better performing farms at 3.53pc, compared to 3.44pc; with fat also higher at 4.06pc against 3.98pc.

This was reflected in the total output of milk solids, which stood at 693kg/MS/ha on the top farms compared to 448kg/MS/ha on the lower income holdings.

Higher milk solids increased the value of the milk produced to 35.3c/l compared to 32.6 c/l. However, far more significant was the differential in the milk production costs which averaged 28.9c/l for the low-income farmers and 19.3c/l for the more efficient holdings.

The result was a net profit of 3.9c/l on the low income farms compared to 16.3c/l on the more efficient units.

While more nitrogen was applied on the better income farms, they used 20pc less bought-in concentrates.

In fact total costs on the low income farms were almost €8,000 higher on average than on the high income holdings and gross output €49,000 lower.