1. Teagasc New Entrants Training Abigail Ryan Teagasc Moorepark

2. Overview Why? Money in Money out Investments Personal Cash flow

3. Why? Money in Money out Investments Personal Cash flow

4. Why? – because it will cost a lot of money Existing farmers 2020 Vision – 50% increase in volumes ICBF Projections on Cow Numbers - +100k in Glanbia?? Possible Cost of on-farm Investment €2,000/cow = €200m €4,000/cow = €400m New Entrants 50% are currently beef farmers Average investment €160,000 approx. Target a yield of 385kg (1,100 gallons) per cow + 10 c/litre profit

5. Why? Money in Money out Investments Personal Cash flow

6. Average Producer Milk Prices  2 c/litre

7. Average Producer Milk Prices  2 c/litre  6 c/litre

8. Source: CSO Average milk price : 2008 : 33.2 c/litre ; 2007 : 33.5 c/litre Monthly Milk Prices (vat incl.)

9. Source: CSO Average milk price 2008 33.2 c/litre : 2007 33.5 c/litre Aut 07 Spr 08

10. Milk price variation vs milk sales Milk price Milk receipts (€/100 cows) 22 c/litre€110,000 28 c/litre€140,000 34 c/litre€170,000 Variation €60,000 per 100 cows

11. Why? Money in Money out Investments Personal Cash flow

12. Range in Physical & Financial Performance 2010 Top 1/3 Middle 1/3 Bottom 1/3 Concentrate (kg/cow) 728961 1194 Days at grass234230 217 Money Out Costs (€/cow) €1,016€1,131€1,300 Variation €28,400 per 100 cows

13. Range in Physical & Financial Performance 2010 Top 1/3 Middle 1/3 Bottom 1/3 Milk Yield (litres/cow) 5,0035,051 4,729 Milk Solids (kg/cow) 355 322 Money In Output (€/cow) €1,631€1,556€1,390 Variation €24,100 per 100 cows

14. Range in Financial Performance 2010 Top 1/3 Middle 1/3 Bottom 1/3 Money In Gross output (€/cow) €1,631€1,556 €1,390 Money Out Costs (€/cow) €1,016€1,131€1,300 Residual cash (€/cow) €615€424€90 Variation €52,500 + per 100 cows

15. Residual cash(€/cow) - left to pay yourself, taxation and repay the investments Money In Top 1/3 Middle 1/3 Bottom 1/3 Money Out Top 1/3 €615 Middle 1/3 €424 Bottom 1/3 €90

16. Residual cash (€/cow) - left to pay yourself, taxation and repay the investments Money In Top 1/3 Middle 1/3 Bottom 1/3 Money Out Top 1/3 €615€540€374 Middle 1/3 €482€424€259 Bottom 1/3 €331€256€90

17. Why? Money in Money out Investments Personal Cash flow

18. ‘Average’ investment costs €/cow Stock€1,400 Milking facilities€1,000 Paddocks, Roadways€500 Soil fertility / reseeding€300 Slurry storage€200 Winter accommodation€350 Machinery / other housing€250 Total€4,000

19. Possible investment costs Low cost Average High cost Stock-€1,400 Milking facilities€1,000 €1,500 Paddocks, Roadways€250€500 Soil fertility / reseeding-€300 Slurry storage€200 €1,000 Winter accommodation€300€350€800 Machinery / other housing€250 €500 Total€2,000€4,000€6,000

20. Possible investment costs Low Cost (€/cow) Average (€/cow) High cost (€/cow) Total Investment costs €2,000€4,000€6,000 Assumptions 10 year repayment period 6% interest rate Annual repayment/cow €274€548€822

21. Residual cash (€/extra cow) - left to pay yourself and for taxation Investment costs €2,000 per cow €4,000 per cow €6,000 per cow Residual cash High profit €341€67- €448 Average €208- €124- €563 Low profit €57- €292- €732

22. Expansion – a case study End of year no’s ‘06‘07‘08‘09’10‘11 Dairy Cows48657795104110 Repl. (0-1) 243227554650 Repl. (1-2) 282432233046 Cattle (LU) 25.321.32.44.200 St. rate (LU/ha) MP SR 1.81 (1.81) 1.94 (2.14) 1.89 (2.68) 2.25 (3.18) 2.6 (3.55) 2.7 (3.68) Milk quota (‘000 litres) 249345416477480592

23. Case study – the investments made (€‘000’s)’06/’07‘08‘09’10/’11Total Quota14.716.612.216.860.3 Buildings19.016.512.280.3128.0 Machinery9.4-1.827.738.9 Infrastructure-3.7-- Total43.136.826.2124.8230.9

24. Case study – the investments made (€‘000’s)’06/’07‘08‘09’10/’11Total Quota14.716.612.216.860.3 Buildings19.016.512.280.3128.0 Machinery9.4-1.827.738.9 Infrastructure-3.7-- Total43.136.826.2124.8230.9 Expansion costs €3,700/cow

25. Case study – the profit generated 20062007200820092010 Milk price c/litre 28.638.036.125.433.3 Common Cost €/cow 892781757688788 Common Profit €/cow 6291,215940548981 €/farm (‘000’s) 30797252102

26. Lessons from Case Study Efficient dairy farms … Can deliver a ‘good’ income independent of SFP Can increase income through expansion But are affected by low milk price

27. Why? Money in Money out Investments Personal Cash flow

28. Living Expenses for Farm Families A consumption unit needs €11,400 A consumption unit = 13+ years Less than 13 years = ½ unit 2 adults and 2 children = €34,200 Average farm family (in 2000) 3.56 persons or 3.2 units (€36,400) What is the figure for your family?

29. Why? Money in Money out Investments Personal Cash flow

30. The transition to 2015 - Cash flow Pre-2015 Cost of rearing extra heifers The milk quota issue Timing of the investment Post-2015 Increasing cow number on milk receipts

31. Dairy cow Suppliers per county CountySuppliers with Deliveries Carlow181 Cavan765 Clare682 Cork4293 Donegal238 Dublin32 Galway601 Kerry1707 Kildare158 Kilkenny916 Laois443 Leitrim54 Limerick1611 CountySuppliers with Deliveries Longford165 Louth199 Mayo430 Meath697 Monaghan680 Offaly367 Roscommon113 Sligo188 Tipperary1896 Waterford780 Westmeath323 Wexford798 Wicklow231 Total18548

33. Compound annual growth in milk output %

34. What % of live heifers calve at 22-26 months?

35. Cash flow – keeping extra heifers Cost €/calf Calf retained on farm (vs calf sold)150 Cash cost of retaining the calf500 Estimate of direct cash costs650 €65 per cow - 10% more heifers

36. Cash flow - The milk quota issue % over quota Milk price +10%+ 30%+ 50% 34 c/l 31.427.424.4 28 c/l 25.421.418.4 22 c/l 19.415.412.4

37. Cash flow - Milk quota options Milk yield effect Cull 10% on 1 st September 100 litres  per cow Reduce meals 500 kg / cow 250 litres  per cow 30 day earlier dry off 300 litres  per cow Sell 10% of herd next spring 500 litres  per cow Once a day all next year 800 litres  per cow Buy quota?

38. Cash flow – timing of the investment 2012201320142015 Stock  Milking facilities  Paddocks, Roadways  Soil fertility / reseeding  Slurry storage  Winter accommodation  Machinery ?

39. Cash flow – effect of expansion on milk yield per cow Source: CSO

40. Cash flow – effect of expansion on milk yield per cow Source: CSO More heifers Herd getting younger Herd maturing

41. Cash flow – effect of expansion on milk yield per cow Source: CSO Milk sales reduced by €300 per cow until herd starts to stabilise again

42. Cash flow – ongoing investment costs Cost €/ha Cash reseeding costs650 Cash cost of retaining the calf500 Estimate of direct cash costs650 €65 per cow - 10% more heifers

43. Successful farmers – the team approach Adviser AI technician Banker Contractor Co-op person Family Milking machine technician Vet

44. Risk analysis Issue Likelihood (Chance of it happening) Impact (Effect on your business) Score (Effect on your business) Milk price Cost of production Level of investment Quota / super levy

45. Risk analysis – example farm Issue Likelihood (Chance of it happening) Impact (Effect on your business) Score (Likelihood X Impact) Milk price4 Cost of production 2 Level of investment 2 Quota / super levy 2

46. Risk analysis – example farm Issue Likelihood (Chance of it happening) Impact (Effect on your business) Score (Likelihood X Impact) Milk price45 Cost of production 24 Level of investment 23 Quota / super levy 25

47. Risk analysis – example farm Issue Likelihood (Chance of it happening) Impact (Effect on your business) Score (Likelihood X Impact) Milk price4520 Cost of production 248 Level of investment 236 Quota / super levy 2510

48. Risk analysis – example farm Issue Likelihood (Chance of it happening) Impact (Effect on your business) Score (Likelihood X Impact) Milk price4520 Cost of production 248 Level of investment 236 Quota / super levy 2510

49. Your next steps … Establish your position – Profit Monitor Complete the worksheet Update your 5 year plan