Irish dairy farmers’ plans appear to be immune from current market conditions, a new survey carried out by the University of Limerick has found.
The survey found that the average increase in milk production among dairy farmers was 42% and they expected to achieve a further 20% in milk production in the coming three years.
Dr John Garvey from the University of Limerick, who carried out the research, said that “dairy farmers should place a value on expansion strategies that maintain or increase flexibility’ that is, their ability to adjust output to shocks such as a fall in milk prices or a prolonged period of bad weather.”
The survey examined the mix of expansion strategies that farmers expected to use – such as increasing their stocking rate, increasing their milk production per cow and increase farm size. The average stocking rate is currently 1.72 and increase from 1.42 per hectare pre-quota. Stocking rate was expected to increase to 1.86 on average.
Garvey said that, for well-managed, free draining farms a stocking rate of 2.3 to 2.6 cows per hectare would be regarded appropriate, if farmers are to avoid a severe spike in feed costs arising from a period of adverse weather.
Garvey, a Senior Lecturer in Risk Management and Insurance at UL, said that potential financial risks may exist for those seeking to increase their farm size.
Of the farmers surveyed, 48 had increased their farm size by more than 20% over the past three years.
“In light of current conditions in the dairy sector it is somewhat surprising that farmers plans reveal that this rate of expansion is likely to continue over the coming three years, with 42 farmers revealing that they plan to increase their farm size by more than 20% in the coming three years.”
Garvey went on to say that in the post-quota era, Irish dairy farmers are less protected from the price implications of geopolitical events as well as global supply and demand factors.
“Given market and policy uncertainties that exist internationally and which are coinciding with a strong expansionary drive at national level, I think that individual farmers may become further exposed if they follow through on plans to increasing farm size either through purchases or leasing.”
Source – Agriland