Labour estimate in new Profit Monitor data

George Ramsbottom, Teagasc Oak Park, highlights some of the key findings from the 2016 Profit Monitor results.

Contributor

3 May 2017

Labour estimate in new Profit Monitor data

Some of the speakers pictured in Limerick at the Irish Grassland Association Dairy Conference which was kindly sponsored by Yara. Included are George Ramsbottom, Teagasc & IGA, Finbar Mulligan, UCD, Nicholas Morrison, Yara, Sponsor and Mary Herlihy, Teagasc, Moorepark.

Spring milk producers generated a net profit, excluding premia, of €1,043 per hectare in 2016, according to the Teagasc eProfit monitor results. The corresponding figure for winter milk producers was €1,164/ha. When own labour is deducted from net profit, the margin remaining on spring and winter milk dairy enterprise averaged €116 and €286/ha respectively in 2016. This is the summary of the average from an analysis of the 1,500 dairy farms presented in Table 1.

Spring milk producers generated a net profit, excluding premia, of €1,043 per hectare in 2016, according to the Teagasc eProfit monitor results.

The corresponding figure for winter milk producers was €1,164/ha. When own labour is deducted from net profit, the margin remaining on spring and winter milk dairy enterprise averaged €116 and €286/ha respectively in 2016. This is the summary of the average from an analysis of the 1,500 dairy farms presented in Table 1.

Calculating the value of own labour

One of the observations made of Profit Monitor is that many of the reports generated do not include a value for own and family labour in the profitability figures generated. In the 2016 report, we report net profit as usual, but we address the own and family labour issue by using the estimated of own labour inputted by farmers completing Profit Monitor.

This labour is then allocated, similar to hired labour, in proportion to the percentage of farm gross output contributed by the dairy enterprise as detailed in the example for a dairy farm with 100 cows producing 500,000 litres per annum in Table 2.

The hours worked per cow is separated from the hours worked in other farm enterprises. So in the example in Table 2, only two-thirds of the hours worked are included in the own labour cost per cow. Other farm enterprises such as replacement heifers and drystock have to reward the farming family for the remaining one-third of hours worked on the farm.

The trend in total hours worked per cow is presented in Figure 1. It indicated that on average, as herd size increases, the number of hours worked per cow tends to decline but by a reducing amount. So for herd sizes of 50, 100 and 150 cows, estimates of total labour inputs are approximately 40, 30 and 27 hours per cow respectively.

Trends over time

A matched sample of 276 spring milk farmers have been completing Profit Monitor every year since 2008. Their data for 2015 and 2016 was compared to see the trends in dairy enterprise profitability.

Milk solids output was up by 13kg to 1,061kg in 2016 compared with 2015, but gross output was back by €426 to €3,860 in 2016.

There was a small change in total costs at €2,571/ha so net profit on these farms was down to €1,288/ha in 2016.