Farmers gathered at the farm of Geoffrey and Carmel Wycherley in Lislevane, Bandon, Co Cork, last week to hear about the lessons they had learned from dairy expansion. And Geoffrey honestly admitted there were plenty – from managing disease and labour to the high cost of the investment required.

Despite heavy downpours, more than 200 farmers came to the Irish Grassland Association and IFAC event.

Since taking over the farm in 2004, Geoffrey had moved from a split-calving winter herd of 100 Holstein cows to spring-calving. Cross-breeding was introduced and numbers jumped to 220 soon after he took on an additional leased block in 2008.

Land fragmentation

The main winter housing was on just 6 acres a mile away from the main grazing block, which has been increased to 60ha. Geoffrey rented a 14-metre right-of-way from a neighbour to allow him to walk cows to the last block of 20ha leased.

“This farm was unusual in that they have run two milking parlours since 1981 to get over the fragmentation problem,” Michael Bateman of the Irish Grassland Association said.

The cows were calved down and milked there and only transferred when they could go out full-time. This worked well in split-calving with smaller numbers, but it increased labour and costs as numbers grew in recent years. Investment was made in 2008 on a full-spec new 24-unit milking parlour on the grazing block. With milking taking up to eight hours a day in 2008, it was needed. It was only two years ago when a straw-bedded yard on the grazing platform was converted to cubicles and, more importantly, adequate feed space built.

“This allowed us to bring the cows up immediately after calving as we could feed and house them if the weather turned wet,” said Geoffrey.

The challenge of labour

Labour was identified as the biggest issue of expansion. It was certainly the area Geoffrey Wycherley has learned the most lessons from. The labour input is now Geoffrey, farm manager Padraig Cunnane and a student in the spring

“We did not employ enough labour and worked too hard for the last 10 years,” said Geoffrey. “There was a cost to not doing things on time. We were so busy that we were not paying attention to detail, doing only what we could get around to.”

Mike Brady, Geoffrey’s consultant, added: “When you are doing the yearly budget it is a difficult step to put in the full costs of a labour unit. But what you don’t see is the loss of income from the poor decisions made at the busiest times of the year.”

Geoffrey said: “We also had no plan B and if something happened to me the whole business could be at risk.”

“My initial plan was to manage 200 livestock units myself. When you are young you believe you can do it, but it was foolish,” said Geoffrey. Mike was quick to throw in: “100 livestock units per labour unit is where it is at, especially when you are expanding.”

Taking on Padraig as a farm manager has changed the focus, but it did take getting used to. “Now we work together and Padraig has taken on the role of stockman, focusing more on the cows. He is the main reason production will increase from 350kg milk solids in 2013 to 415 kg DM/ha this year,” Geoffrey added.

The unexpected hits

“In 2014 we got hit with TB and lost 46 cows. You get compensated for the cows but it is the sudden drop in income from the milk you would have sold that hurts the most,” said Geoffrey.

Following that, the herd suffered an IBR outbreak which was costly and forced them into vaccinating. “Looking back, the strain we were under at the time because of labour was definitely a factor and some of the issues could have been avoided,” Geoffrey added.

Overinvestment

Building projects have to be carefully budgeted and financed. Walking around the farm, it was obvious that Geoffrey liked to do things well.

“Building projects often take 25% more than farmers anticipate. It’s the 25% that gets them into trouble as they have not budgeted on how to finance it,” said John McNamara of Teagasc. He also stressed that young stock are not free. Heifers cost €1,400 to rear, yet farmers often forget about this cost when looking to expand and too often they do it out of cash flow. It is these issues that farmers who are planning to expand out will get caught out on,” said John.

The man and his team

The most critical element is the dairy farmer himself, and the team he has around him. Mike Brady outlined his interesting way of assessing his dairy farmer clients. The way he sees it there are several different areas – stockmanship, grassing management, whether they like development and machinery, and finally, how good they are at finance.

“Geoffrey is not the best stockman but is good at grassland management. He is a developer at heart and loves building projects as well as machinery. His greatest weakness is finances,” Mike summarised. Geoffrey did not disagree.

One of the strong lessons to learn is to know what your weaknesses are and make sure you get the advice in that area. This was obvious around finance, where Geoffrey used Mike Brady to do budgets each year and IFAC to pull the accounts together.

“Geoffrey is in a farm partnership with his wife Carmel, who works off-farm. This allows the farm profits to be reinvested in farm development and loan repayments. The only reason they are not in a company is capital allowances. When they are gone they will move into one,” Brian Denn, IFAC branch manage Blarney, said.

The one true measure

The only true measure for dairy farmers is profit per hectare on a whole farm basis. Figures put up for the farm by Mike Brady show two good years in 2013 and 2014, with output per hectare over €4,400 and net profit over €1,500. The budget for 2015 shows output will be back to €3,640, mainly due to an anticipated milk price of 32c/l – a fall of 10c/l compared with 2014. He has fixed 20% of his milk price at the equivalent of 39c/l based on his solids.

Expand or consolidate

The biggest debate came around over the question of whether Geoffrey should consolidate or look to set up a second unit on the 100-acre outfarm he is already renting on a long-term lease in Bandon.

Geoffrey wanted to go ahead, admitting he is already building extra heifers at a cost to the system.

Both the advice of Mike Brady and John McNamara was to consolidate. “Geoffrey has been through rapid expansion phase and he now needs to consolidate before he goes again,” was Mike’s line.

“If you take €300 per acre for land, €300 for labour and €300 for repaying investment there will be very little in setting up a second unit for many farmers,” he added.

“Expanding by putting on a few extra rows is a no-brainer for most farmers, but taking a big step up in numbers, especially if it is on an outside block, has to be carefully considered,” said John.

“Most farmers, like Geoffrey, have plenty of opportunity to build on what they have before taking on an additional unit which could put the whole business under stress,” he added.

One farmer asked if he would be caught by inflation and rising costs if he just stood still. You are not standing still if you are paying down debt which will leave you with more income and reduce the risks.

Talking to Geoffrey afterwards, he was not swayed, despite highlighting the importance of the advice he gets. It looks like we will have to revisit Geoffrey to see if the heart really does rule the head when it comes to expansion plans. It seems there could be additional lessons to be learned yet.

Share-milking

“Share-milking and partnerships will bring opportunities to farmers and the young people are there if the right system can be put in place,” Austin Finn of the Land Mobility Service told the farmers. He told them that the first share-milking arrangements are already in place.

Declan McEvoy, head of tax at IFAC, said there has been good work done to changes in the tax situation to encourage long-term leasing and partnerships. “However, when it come to share-milking, a lot needs to be done,” he said.

“If a young farmer was to take stock to build equity as part of the arrangement, it is deeded as notional income and taxed that way. The farm organisation and the Department of Agriculture have to push to get it changed to make the new structures like share-milking more attractive,” said Declan McEvoy.