Dairy Farmers Advised on Need to Increase Scale

23 September, 2003

Dairy farmers who do not change their system of farming following the implementation of the new EU dairy policy will experience a substantial drop in income over the coming years, according to Teagasc.

Dermot McCarthy, Chief Dairy Adviser with Teagasc, told farmers attending the National Ploughing Championships that a dairy farmer with 50 dairy cows and a store cattle enterprise on 40 hectares (100 acres) is currently making an income of €38,000.

"According to our analysis, the worst option for this farmer is to continue with his/her present farming system. This would result in an income in 2008 of just over €30,500, a drop of 20%."

"If the farmer reduced the cattle enterprise and joined the Rural Environment Protection Scheme (REPS), the farm income in 2008 would be €41,300, an increase of around 9% on the current level," said Dermot McCarthy.

However the best option for this sample dairy farmer would be to increase the size of the dairy quota from 230,000 litres (50,000 gallons) at present by 13,000 litres per year over the next five years.

"This would result in an income of €44,000 in 2008, an increase of almost 16% on the current level. This highlights the necessity for those farmers who intend to remain in dairying to increase the scale of their business in order to protect their incomes," he said.

Dermot McCarthy said that the key target for dairy farmers must be to retain greater than 50% of farm output as profit. This involves keeping total costs of production at or below 14c/litres (50p/gallon) and maximising the value of milk sold off the farm. The Teagasc advisory programme is focused on these two critical issues," he said.