Review of Teagasc Activities in 2014 and Prospects for the

Dairy Sector

Presentation to Oireachtas Joint Committee on Agriculture, Food and the Marine

March 10, 2015

Professor Gerry Boyle, Director Teagasc

Dr Tom O’Dwyer, Head Dairy Knowledge Transfer, Teagasc

Teagasc mission

To support science-based innovation in the agri-food sector and wider bioeconomy so as to underpin profitability, competitiveness and sustainability

Teagasc goalsGOAL 1

Improve the competitiveness of agriculture, food and the wider bioeconomy

GOAL 2

Support sustainable farming and the environment

GOAL 3

Encourage diversification of the rural economy and enhance the quality of life in rural areas

GOAL 4

Enhance organisational capability and deliver value for money

The Teagasc model of innovation

Teagasc programmes

• Animal and Grassland • Crops, Environment and Land Use• Rural Economy and Development• Food• Education• Advisory• Operations

Teagasc organisational chart, March 2015

Selected highlights in 2014• Promotion of genomics in animal breeding and new beef breeding

indices to underpin profitability (with ICBF)• Completion of National Soils Survey• Scientific verification of Irelands’ sustainability credentials and roll out of

the “Carbon Navigator” (with Bord Bia)• Policy support to the CAP negotiation and implementation• Advisory service – 43,000 clients and 13,000 in Discussion Groups • Collaborations with food industry ~ 250 companies per year• Teagasc /Irish Farmers Journal BETTER Beef programme• Science–based policy support to Nitrates Action Programme and

Climate Change Policy• Educating a new generation of farm managers – 3,600 in Teagasc

courses, including, Professional Diploma in Dairy Farm Management, plus 3,500-5,000 in Adult Education and Training plus response to education needs as a result of the RDP

Current expenditure € m. 2008 – 2015

2008 2009 2010 2011 2012 2013 2014 2015 (Budget)

020406080

100120140160180200

96 95 80 78 71 70 68 70

33 4340 43 44 41 40 45

59 46

41 51 53 50 5158

Non-pay

Pensions

Payroll

c. 39 % own generated income (excl. pensions)

800

900

1000

1100

1200

1300

1400

1500

1600 Year: 2001

Year: 2009

Year: 2014

Teagasc staff numbers 2001 to 2014

- 25%

Teagasc sites’ map March 2015

March 2015

Advisory offices 52

Teagasc colleges 4

Private colleges 3

Research centres 7

Trends in client and adviser numbers 2000 to 2014

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

05000

100001500020000250003000035000400004500050000

0

50

100

150

200

250

300

350

400

450

500No of Clients No of advisers

Clients Advisers

- 42%Critical advisory shortages in majority of regions especially Cork, Meath, Mayo and Tipperary, Galway / Clare and Kerry /Limerick

2006 2007 2008 2009 2010 2011 2012 2013 20140

200

400

600

800

1000

1200

1400

1600

1800

90

95

100

105

110

115

College enrolments, teachers and technicians

Enrolements Staff Numbers

Enrolments Staff

Enrolments

Enrolments +154%

Staff shortages in all colleges

Refereed publications by permanent researcher 2009 to 2013

2009 2010 2011 2012 2013100

200

300

400

500

85

90

95

100Publications Researchers

Publications Researchers

Critical vacancies in Food, Animal Science, Soils Science, Fertiliser

Science, Beef, Tillage, Horticulture

Challenges and opportunities for Teagasc

• Innovation on farms and in processing industries never more important • Continued reduction in frontline personnel due to recruitment and

promotions’ embargo• Securing on-going investment for infrastructural needs• Responding to RDP education demand – an extra 1,000 + applicants

for Teagasc Green Cert • Supporting farmers’ participation in GLAS – 15,000 + Teagasc clients• Supporting dairy and beef farmers post quota• Gearing up to support innovation drive in dairy and beef processing –

MTL investment and “Food Technology Hub” at Teagasc Moorepark• Climate Change and Sustainability – Kildalton Sustainable Farm Project• Teagasc must continue to innovate and change and ensure value for

public money

Prospects for dairying …

Key economic metrics on dairy farms

• Big range in performance• Relatively low levels of debt (all dairy farms €62k; all dairy farms with debt €94k)• A significant number of dairy farmers face a potentially challenging 2015• Proportion of farmers using financial management tools is low

Spring milk producers

Average Top 10% Bottom 10%

Milk price, c/l 39.4 40.8 38.2

Gross output, c/l 39.5 42.1 37.0

Variable Costs, c/l 12.8 10.6 15.3

Fixed Costs, c/l 10.1 7.6 13.5

Total Costs, c/l* 22.9 18.2 28.8

Net Profit, c/l 16.4 23.9 8.2

* excl. family labour, owned land and capital Source: Teagasc Profit Monitor analysis, 8/2/2015

The future

What will this mean?• 330,000 more cows• €1.5 – 1.9 bn new investment• Larger dairy farms and more specialisation • Increased on-farm/ off-farm employment• More land used for milk production

Base 2010 2012 2014 20200

1000

2000

3000

4000

5000

6000

7000

8000

Milk deliveries (m litres; CSO)

Milk deliveries (m litres)

+ 50%

Price volatility

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '1520

22

24

26

28

30

32

34

36

38

40

c/ litre28c/litre 2 c/litre

32.5 c/litre 6+ c/litre

Source: CSO Manufacturing Milk Prices 3.7% fat and 3.3% protein; various years

• Total costs of production have increased from 22.0 c/litre (2007) to 27.4 c/litre (2013) (Teagasc NFS)• Expansion will cost money – costs to increase further?

500,000 litres milk supplier2 c/litre drop in milk price = €10,000 drop in revenue

Coping with volatilityManaging price volatility• Improve cost control• Produce high solids milk• Build cash reserve• Increase/reduce capital

spending • Appropriate finance for

expansion • Develop a cash flow budget• Fixed milk price scheme

Milk price

High CostMedium CostLow Cost

High cost: Competitiveness problemMedium cost: Needs to manage price riskLow cost: Can ride out the volatility

Response to price volatility will depend on current cost structure of farm

business

Buckley, T. (2012), Managing Price Volatility in Dairy Farming, Proceedings of Teagasc National Dairy Conference, pp. 89 – 98.

Other risks• Weather• Animal disease• Interest rates• Increased debt

Teagasc Dairy KT Programme• Equipping dairy farmers for a sustainable future …• Emphasis on resilient dairy systems• Cash Plan Programme (DAFM funded, 2014)• Discussion Groups• eProfit Monitor analysis• ‘My Farm, My Plan’ strategic planning booklet• Series of Spring Dairy Seminars• Business planning tools• Proposal to develop a new service – Dairy Expansion

Service

Summary Teagasc approach to dairy expansion • Teagasc promotes ‘resilient dairy systems’• Teagasc recommends expansion only from an efficient

base – ‘better before bigger’• Farmers will have to adapt to cope with milk price

volatilty• Industry stakeholders also need to provide potential

solutions • Potential cash flow issues for some farms in 2015• Teagasc will support dairy farmers to expand in a

sustainable manner

THANK YOU