Winter Housing and Feeding System for Small to Medium Sized Dairy Farms

1. Summary

A survey of 190 dairy farms in a co-operative area in the south of Ireland served as the main source of data in the present study. Eight farms representative of the different types of dairy farms were chosen and their data were analysed using the Finpack financial analysis program. These eight case studies were analysed using alternative funding strategies to determine the effect of alternative funding strategies for farm buildings on net farm income.

The data obtained were extrapolated to the national dairy herd. There are some 14,050 dairy farms with quotas of less than 15,000 gallons and 40% of these were classified as non viable. The corresponding figures for other quota categories are as follows: 8,150 farms with quotas of 15,000-25,000 gallons with 40% non-viable; 7780 farms with quotas of 25,000-40,000 gallons with 20% nonviable; and 8,535 farms with quotas >40,000 gallons with 10% nonviable. Non-viable dairy farms were those with low income, low contact with advisory services, low household dependence on farm income, a poor attitude to development and expansion and generally inadequate farm facilities. Non-viable dairy farms should consider changing from dairying into a suckler and/or beef enterprise and should be assisted to do so by the advisory service. They should be considered for a suckler quota unit for each 987 gallons of milk they had been producing. They should consider using income assistants, e.g., REPS, Early Retirement Scheme and/or unemployment benefits as relevant. Training schemes should be targeted at young farmers and their spouses who are not working so that they have a better chance of off-farm employment, when relevant.

Potentially viable and viable dairy farms should be assisted on a sliding scale depending on their quota size, as follows: Grant aid for upgrading milking facilities, grant aid for milking and milk cooling equipment, interest subsidies on interest payment on money borrowed for agricultural development, the smallest milk quota farms should be considered the priority for milk quota reallocation, quota purchase should be subsidised if possible, quota leasing should be subsidised for the smallest quota category (<15,000 gallons), installation Aid should be introduced for all viable and potentially viable dairy farms.

2. Introduction

3. Results

A summary of the main findings from the survey is provided in Tables 1 to 5; this shows the main differences which emerged between the different dairy farms of different quota sizes.

Table 1. Summary of household characteristics of dairy farms.

Table 2. Summary of farm characteristics and farm management practices on dairy farms.

VIEW TABLE 3

Table 4 : Summary of buildings on farms.

Table 5 : Percentages of farms with different items of machinery.

• The small quota farms (<15,000 gallons) had the poorest education, marital status and attitudes towards future training was lowest in this group of farms. These farms also had the highest proportion (20%) of farmers with off-farm incomes and the poorest household structure. These characteristics were better in medium quota farms and best in high quota (>40,000 gallons) farms.
• Farm characteristics followed a similar trend. Small quota farms had the smallest area farmed (owned and leased). They had the poorest management techniques, lowest level of contact with the advisory service and lowest production intensity. All of these characteristics improved with increasing quota size.
• Farm incomes also followed a similar trend. Farm income was lowest on small quota farms (<15,000 gallons). Output per dairy cow was also lowest, as were feed costs, direct costs and overhead costs. Net profit per dairy cow was also lowest on these farms and these farms also had the lowest level of capital invested in buildings and machinery on a per cow and per farm basis. Overall, these dairy farms operated a low input-low output system. Medium quota farms were operating a medium input and a medium output system. The large quota farms (>40,000 gallons) had the highest net profit, highest output per cow, and the highest feed costs, direct costs and overhead costs. They also achieved the highest net profit per cow.
• The small quota farms (<15,000 gallons) had the poorest facilities on their farms. Over 63% of farms had bucket plants and tie up byre pipelines. Dairy housing was of a reasonable standard only and 35% of farms were using mobile milk tanks. Many farms operated a hay feeding system and only 50% of farms had facilities to handle pit silage. Waste storage facilities were poor. There was minimal machinery on the farms with the main machinery being used for grassland management.
• Dairy farms of between 15,000 and 25,000 gallons had facilities which were somewhat better than the small dairy farms. About 25% used bucket plants or pipelines as milking facilities, and 98% had fixed milk tanks. Dairy housing and waste storage facilities were of a reasonable standard. Over 80% of these farms had facilities to handle pit silage. There was minimal machinery on these farms with the main machinery being used for grassland management.
• Dairy farms of between 25,000 and 40,000 gallons had good milking facilities. Over 93% had milking parlours (abreast and herringbone) and all had fixed milk tanks. Dairy housing was reasonably good and most farms used cubicles. The majority had facilities for handling pit silage while the waste storage facilities were of a reasonable standard. There was a reasonable amount of machinery with most farms having machinery for grassland management. About 50% of these farms also had waste spreading machinery.
• The large quota farms (>40,000 gallons) had good milking facilities and all had milking parlours and fixed milk tanks. The standard of dairy housing was good. The majority had facilities to handle pit silage while overall waste storage facilities were of a reasonable standard. There was a high amount of machinery on farms; nearly all had machinery for grassland management. About 75% of farms had waste spreading machinery.

From the results of the survey into farm and household characteristics on dairy farms, and the results from the Teagasc National Farm Survey for 1993 and 1994 in relation to farm income, it was possible to quantify numbers of viable, potentially viable and non-viable dairy farms, using a model developed by Kinsella (1995).

Model developed by Kinsella (1995)

The main factors in the model developed by Kinsella in relation to farm household viability were household structure and household income. From the results shown earlier the small dairy farms (<15,000 gallons) were earning an average household income of around £7,900. In addition to this, 34% of farmers were not married in this category, 43% of households had no children present and over 50% of farms were run by farmers over 50 years of age. This meant that approximately 40% of farm households in this category were not viable. This added to the farm income earned meant that while 60% of these farms (8,480 farms) could be potentially viable with state help, the remaining 40% of farms (5,650 farms) were not going to remain in milk in the long term.

The same criteria was applied to the farms in the other quota size categories. Of the farms with a quota size of between 15,000 and 25,000 gallons, again approximately 40% of these farms had poor household structures. This coupled with the income derived on these farms meant that approximately 40% of these farms (3,260 farms) were unlikely to be viable in the future.

The remaining 60% of farms (4,890 farms) in this category were potentially viable with help from the state. About 20% (1,555 farms) of the next category of dairy farms (25,000 to 40,000 gallons) were unlikely to be viable. More farmers in this quota category were married than the previous two categories (<25,000 gallons), the age structure tended to be slightly younger and more of these households had children present. A further 20% of farms (1,555 farms) in this quota category were potentially viable, while the remaining 60% of farms (4,670 farms) were in no immediate risk of ceasing milk production.

The final category of dairy farms (>40,000 gallons) were either viable or potentially viable. While not all farms had good household structures, the incomes derived on these farms was quite good. About 10% of these farms (855 farms) had poor household structures, but these farms could be kept in milk production through milk quota leasing, share milking or other such alternatives. The remaining 90% (7,680 farms) are either viable or potentially viable dairy farms.

4. Some recommendations that should be considered for non-viable farms.

• To target these categories for grants for upgrading farm facilities and acquiring more milk quota is not feasible or practical.
• These farms should consider withdrawing from milk production and enter suckler cow and drystock enterprises. Suckler cow quota from the national reserve should be made available to these dairy farms, on the basis of one suckler cow unit for every 987 gallons of milk that was produced.
• Income assistance such as REPS, Early Retirement Scheme and unemployment benefit should be considered where relevant.
• Advisory services might help these farms to make the necessary adjustment from dairying to suckler cows/drystock and to help these farms qualify for any available income support schemes.
• Farmers should consider selling their milk quota. This milk quota should then be made available to other small quota size dairy farms.
• Training schemes should be targeted at young farmers and their spouses who are not working, so that they will have a better chance of finding off-farm employment (largely inapplicable to large non-viable farms).

5. Schemes/regulations which are likely to be relevant to future farm development for the 'viable' and 'potentially viable' farm households.

The schemes that are most likely to help farmers stay in milk production and other farmers to change to a drystock/suckler cow enterprise or retirement are;

1. Revamped Dairy Hygiene Scheme.
2. New scheme for grant aid on Plant and Fittings for Milking Facilities.
3. Reintroduction of Control of Farmyard or Farm Improvement Programme.
4. New scheme for reallocation of milk quota and subsidising leasing/purchasing milk quota for small dairy farms.
5. Rural Environmental Protection Scheme.
6. Re-introduction of Installation Aid Scheme for Young Farmers.
7. Scheme for interest subsidy on loans for farm development to a level of 8%.
8. Early Retirement Scheme to get changeover on farm ownership.

6. Types of financing that might be required by farmers who require to invest in new and upgraded farm facilities and formulating ways of financing such investment.

This objective was met through the use of case studies. From the eight case studies of different size quota farms the following conclusions can be drawn.

1. Not all small dairy farms (<15,000 gallons) will be able to continue on in dairying when building costs are taken into account. (some would be better off ceasing milk production).
2. The small dairy farms that do stay in dairying will need ; (i) grants, (ii) subsidised interest on agricultural loans for development, (iii) priority access to milk quota, (iv) subsidy on lease/purchase of quota @ 40% and (v) intensive advise.
3. Not all dairy farms between 15,000 and 25,000 gallons will be able to stay in milk production when building costs are taken into account (some might be better off ceasing milk production).
4. The medium (15,000 to 25,000 gallons) dairy farms that do stay in dairying will need ; (i) grants, (ii) subsidised interest on agricultural loans for development, (iii) priority access to milk quota, (iv) subsidy on purchase of quota @ 25% and (v) intensive advise.
5. Most farms between 25,000 and 40,000 gallons should be able to survive in dairying as no other option will give them a better income.
6. The medium (25,000 to 40,000 gallons) dairy farms that do stay in dairying will need; (i) grants, (ii) subsidised interest on agricultural loans for development to 30,000 gallons,(iii) access to milk quota (iv) subsidy on purchase of quota @ 10% to 30,000 gallons (v) intensive advise.
7. Most large dairy farms should be able to stay in milk production as no other option will give them the same income.

Only minor grants would be necessary for this group of dairy farms.

7. Discussion

From the analysis throughout this study and the data from the case studies, it is evident that the present number of dairy farms in this country cannot be maintained. Many small dairy farms are not viable in their present state, never mind these farms erecting new/upgraded buildings and repaying for such facilities. While some smaller dairy farmers will have to cease milk production, their milk quota could be used to make other small dairy farms viable. The overall goal of any set of recommendations related to milk production, set in the context of maintaining the maximum number of dairy farms must focus on;

1. What can be realistically done to maintain the maximum number of farms in milk production and
2. Measures that will insure the milk pool released by small dairy farm getting out of dairying will be redistributed to other small size quota farms.

It has to be accepted that not all dairy farms can be maintained in milk production, but for many small quota size dairy farms to stay in the business they need two things.

1. Firstly they must upgrade facilities on farms to European Union standards and
2. They must try to increase farm income, through getting assess to extra milk quota.

So any overall survival package to help dairy farmers will have to include the following;

1. Grant aid to upgrade existing facilities or build new facilities.
2. Subsidised loans to help repayments on building developments.
3. Assess to extra milk quota for farms with a small quota size.
4. More advisory contact for smaller dairy farms, so that these farms can increase productivity and increase farm incomes.

For the non-viable dairy farms that have to cease milk production, these farms will need income aids such as the Rural Environmental Protection Scheme (REPS) and the Early Retirement Scheme (ERS).

While not all dairy farms that are presently supplying milk are 'viable' or 'potentially viable', the vast majority of milk suppliers in the country could be maintained in rural areas with some help. While some small farms (15,000 gallons) and some medium farms (15,000 - 40,000 gallons) are 'not-viable' over 28,000 of the remaining dairy farms could be maintained in milk production in the long term (5-7 years). While many of the medium sized farms would be earning a good standard of living, some have very poor household characteristics which are threatening household viability (i.e. nonviable).

7.Publications

Kinsella, J. (1995). A Study of Development Information Needs of Viable and Potentially Viable Farm Households in Ireland in the Context of a Changing Policy Environment. Ph.D. Thesis.