Low confidence halts dairy investments

High construction costs, high interest rates, low margins and a general lack of confidence in the sector – as a result of poor weather and uncertainty over policy – means that investments in new milking facilities have eased.

At one end of the scale, new entrants getting into dairy are finding it increasingly difficult to justify the costs involved.

Concrete costs are now 70% to 80% higher than they were in 2019, which is an enormous cost increase for a material that’s a key part of the construction of milking parlours.

Steel costs are also much higher than in 2019 but there is some evidence of steel coming back in price.

Six or seven years ago, a basic milking parlour could have been purchased for €2,000 to €3,000 per unit but that cost is now more like €5,000 to €6,000 per unit, while more hi-tech plants are costing well north of €10,000 per milking unit.

Look at the costs put forward by Teagasc’s Patrick Gowing at the Irish Grassland Association walk as outlined here.

Spending almost €330,000 excluding VAT for a 20-unit parlour on a greenfield site is an enormous cost.

Across a typical 140-cow farm, that’s almost €2,400/cow alone in capital costs for just a milking parlour. Throw in cubicle sheds, slurry storage, silage pits, roadways and the cow herself and it’s easy to come to €7,000 or €8,000/cow of capital investment – if converting a greenfield farm to dairy today.

The economic realities of running an established dairy farm business with little debt make the investment in the parlour alone hard to justify, let alone a new business with more to be spent.

The removal of Government supports for investments is another blow and this is outlined here.

Improving milking efficiency doesn’t have to cost the earth and Thomas Condon outlines some relatively cheap and effective things he has come across to make dairy farming easier. Read this here.