Optimism abounds as dairy farmers prepare for life without quotas in the European Union, explained Irish Dairy Farmer Michael Murphy. Murphy and his wife Geraldine joined German Dairy Farmer Eckhard Meiners on a panel at the 2015 PDPW Business Conference, March 18-19, sponsored by Professional Dairy Producers of Wisconsin.
"There is a large air of optimism in Ireland about milk production," Murphy said. "There are lots of young farmers getting started, and agricultural colleges are filled."
Michael Murphy's father had 25 cows in 1973, when Ireland and the United Kingdom joined the EU. By 1983, the base year for quotas, the Murphy farm had 50 cows. Murphy pointed out that, while Ireland and Europe are still producing the same volume of milk as they were in 1983, production is expected to increase when the post-quota era begins April 1.
Meiners said the biggest challenge on his dairy is finding employees and educating them. Both Murphy and Meiners described European dairies as very family focused, with family labor often not calculated into the cost of production.
"The biggest learning curve as we grow is learning to delegate," Geraldine Murphy said.
Other challenges within the EU are looming, too, such as how farmers will deal with milk price volatility. The lifting of quotas is bound to cause price swings, and instruments for managing through lower prices such as private storage, price management tools, or organized forms of milk quantity adjustment are not yet in place.
Another major challenge is land acquisition to support plans for growth. "Land is the new quota," Murphy said. The Murphys have 117 cows and are planning an expansion.
Murphy explained that most of the land in Ireland is passed from generation to generation, and very little comes up for sale. When it does, he said it is in small blocks, making farming on a larger scale more difficult. Murphy said land sells for $11,000-$12,000 per acre right now, and has sold as high as $20,000 per acre.
Meiners has 620 cows and describes land acquisition as one of his major roles. He said he has to be ready to purchase when land is available and conveniently located. Moving equipment from land block to land block is costly, he pointed out.
Murphy said there is much discussion among European farmers about how to increase milk production while controlling costs.
"We have to guard against cost creep," Murphy said. "People want to sell us this additive or that method to increase production We need to keep it simple and be competitive."
Murphy said his milk prices have fluctuated between 30 and 40 cents per liter, the U.S. equivalent of $12-14 per hundredweight. Irish farmers are often paid more for fat and protein above the base price. One of the challenges discussed among European dairy farmers is how to include family labor and fixed costs such as land in the cost of production. The previous investment in a quota has dwindled to nothing, while labor costs and land costs will be the modern challenges for growing dairies to face.
Meiners says the lifting of quotas also brings freedom for farmers to enter or exit the business.
"Dairy farmers often felt forced to continue producing milk because they owned a quota, and that was an investment. Now it will be easier for people to decide not to produce milk and produce something else on their land," Meiners stated.
When asked whether he thought this new era would bring a big change in farm sizes, Murphy said, "It's important to optimize your system versus maximize your system. You optimize for your own environment. I do rotational grazing. That may not work for someone else who has six months of grazing."
Honing management skills and fine-tuning business plans, the Murphys are ready to bring their son Jerry into the business.
"We are looking forward with confidence to the post-quota era," he said, as he offered the audience a photo of his farm under a rainbow. "The proverbial pot of gold is sitting right there."
More highlights from the conference are available at www.pdpw.org.
Professional Dairy Producers of Wisconsin is a dairy-producer founded organization that provides educational programs and services to fellow dairy producers. PDPW's mission is "to share ideas, solutions, resources, and experiences that help dairy producers succeed."3.19.2015