20 December 2024
New cost control tool for dairy farmers
Dairy farmers attending the Teagasc National Dairy Conference were given a first look at a new tool to enable better cost control on their farms.
Showcased by Patrick Gowing, Dairy Specialist, and Nora O’Donovan, Dairy Advisor on the Dairygold Joint Programme, the Teagasc Dairy Farm Bill of Quantities is a new tool working alongside the Teagasc Profit Monitor.
Developed in response to the identification of considerable cost differences between high margin and low margin dairy farms in 2023, particularly in the areas on non-feed and non-fertiliser costs, the new tool has used a modelled farm to establish the exact levels of inputs required to run a dairy farm. This data can then be used to compare against inputs on your farm to help identify potential areas of overspend.
Pictured at the Teagasc National Dairy Conference from left to right are: Brian Desmond; Patrick Gowing, Teagasc Dairy Specialist; Jerome Desmond; and Nora O’Donovan, Teagasc Dairy Advisor on the Dairygold Joint Programme. Picture: O’Gorman Photography.
As part of the ‘Controlling dairy production costs in 2025’ workshop at the National Dairy Conference, Patrick Gowing shared the results of an analysis of 720 dairy Profit Monitors completed in 2023. From this, it was found that the top 10% of farms returned a net margin of €1,186/cow, whereas the bottom 10% of farms returned a net margin of just €40/cow.
Although 52% of this variability was attributed to differences in gross output, the remainder was as a result of variability in either fixed cost or variable cost spend. Notably, however, differences between feed and fertiliser spend accounted for just 9% of the difference between the high margin and low margin farms, whereas cost differentials in contractor (14%), other variable costs (21%), labour (21%), buildings deprecation (5%), leases (10%) and other fixed costs (27%) have grown in importance as the causes of differences between high and low margin farms.
Given the above, the Teagasc Dairy Specialist explained that there is massive scope within each cost category to reduce the cost of production.
“Over €500/cow in additional profit was attributed for by cost control on the higher margin farms. A saving of €100/cow in costs in 2023 would increase the profitability of the average farmer by 16%. So small changes can have a large impact on farm profitability,” Gowing explained.
The role of the Teagasc Dairy Farm Bill of Quantities
This is where the Teagasc Dairy Farm Bill of Quantities comes into play.
“We wanted to develop a shopping list of basically everything that goes into run a dairy farm based on Teagasc best practice. Padraig O’Connor sat down and went through what number of items are required to run the system, down to the last detail.
“From this, each cost on your farm can be examined and compared to the Teagasc Dairy Farm Bill of Quantities. If there is a large variance in costs, then the farmer and advisor can do a comparison of the actual inputs the farmer is purchasing against what is required.
“This will help farmers identify if they are over using any inputs and then they can explore options to reduce this and help maintain costs on farm,” Gowing explained.