Managing a business in an era of volatile milk prices
Steven Millar (NIIAS Chairman), Morgan Sheehy (Devenish), Paul Vernon (Glanbia Cheese) and Dr Sam Kennedy (NIIAS President)
The Chief Executive of Glanbia Cheese, Paul Vernon and Morgan Sheehy, Director of Ruminant Division, Devenish Nutrition were the guest speakers at a recent breakfast event organised by the Northern Ireland Institute of Agricultural Science (NIIAS). The event, which was sponsored by John Thompson & Sons Ltd and the Irish Farmers Journal, had the theme ‘Managing a business in an era of volatile milk prices’.
Paul highlighted that much of Glanbia’s ongoing success could be attributed to a “relentless focus on costs and innovation” with investment in new technologies and products being key, and a cost efficiency focus applied whether milk prices are high or low. Glanbia benchmarks its own processing plants with others to assist in the control of costs and Paul insists on “driving plants hard".
He felt that milk prices are yet to bottom out with increasing production on one hand and falling demand in China and the Russian ban on EU agricultural products. In the long term he believes that milk production will migrate to regions which are able to produce milk most efficiently and mechanisms are needed to increase efficiency along the entire supply chain. Twelve months ago when milk prices were high, retailers and customers were at the sharp end, but the present low prices have now placed producers and processors in a weak position.
Paul agreed that hedging or linking milk price to feed costs could be potential options to alleviate some milk price volatility, as volatility is of concern to everyone in the supply chain. However he stressed that it would be vital that milk purchasers are ‘bought in’ to the idea, but there has been an increased interest from customers in ‘fixed price’ models.
Morgan Sheehy focused on efficiences at primary producer level. He highlighted that over the last 30 years there have been approximately 13 major world milk price fluctuations, but producers within the EU have been largely protected from their impact until more recent times. In future these milk price fluctuations can be expected as often as every 18-24 months. Morgan identified the ability to spread profits and losses across financial years and the discipline to hold profits from good years in reserve as key tools in managing these fluctuations.
Morgan stressed the need to keep robust farm management figures - and to benchmark where possible. A study in the south of Ireland found that 60% of farms were not keeping records that were crucial to their business and many farmers simply do not know their costs of production. Benchmarking has revealed huge variations in profitability with data showing a gross margin difference of £2,363 per cow between some dairy farms in NI. Morgan outlined three legs of the farm business “stool” which he believes are critical to any livestock farm: Health, Farm Management and Nutrition. He questioned should farmers really want a heifer calf from a high yielding “good” cow which has fertility problems?
He also highlighted the benefits of maximising yield from forage with Teagasc figures from 2010 suggesting that every tonne of dry matter (DM) of forage could be worth up to €160. With the average DM here being 7t per Ha and the top 15% of producers getting 15t + per Ha, the difference could be over €1,000 per Ha. Morgan outlined that extra meal feeding is also shown to have significant benefits in terms of milk produced vs. the costs of the extra feed, but this should only be considered if the cow is able to respond to extra meal feeding, i.e. her genetics and current health status. Morgan stated that 80% of dairy cow problems can be traced to cow management within the 3 weeks before and after calving.
Morgan stressed that farmers shouldn’t react to lower milk prices by feeding less to reduce yield as overheads will remain the same and that short term benefits in cost savings may be outweighed by health and fertility issues after 6 months. He believes that costs can be controlled by keeping production up so anyone milking three times per day for example should continue to do so. In summary Morgan stressed that farmers must have the figures to show where their business is currently at and to have a plan to know where they want to get to.
NIIAS summer visit to the Orchard County
David Johnston, Oliver McCann, Steven Millar (NIIAS Chairman) and Kevin McCann
Members and guests of the Northern Ireland Institute of Agricultural Science (NIIAS) recently spent a very pleasant afternoon visiting the premises of an apple packer and processor, and the orchard of an apple grower in Country Armagh. .
Founded in 1968, P McCann & Sons are leading packers and processors of apples, pears, pure apple juice and cider. Key to the McCann’s ongoing success is their in depth knowledge and expertise of fruit growing and marketing, and nothing is more important to them than the famous local Armagh bramley apple which received EU Protected Geographical Status (PGI) in 2012.
Oliver and Kevin McCann provided NIIAS members and guests from the Institute of Food Science and Technology (IFST) and the Agricultural Science Association (ASA) with a detailed background to the company’s history. Having progressed from selling bramley apples door to door when the company was founded, P McCann and Sons now pack and produce juice and cider from a wide range of locally grown fruit and they continue to invest in technology, marketing and expertise to ensure they are able to meet the current and future demands of the marketplace. McCann’s are listed with all of the major supermarket chains in the UK and Ireland and continue to expand their retail, wholesale and catering markets.
After an in depth tour of McCann’s apple packaging, processing and bottling facilities, the group visited a newly planted orchard outside Loughgall belonging to David Johnston. Established four years ago the orchard is an exemplar of the high density orchards appearing in the area which offer greatly increased productivity and ease of maintenance. Senior Horticulture Development Adviser Kieran Lavelle was on hand to explain the establishment, maintenance, harvest and best practice management including costs and projected returns associated with an orchard of this type.
The visit was followed by a buffet meal in the Famous Grouse, Loughgall. NIIAS would like to thank P McCann and sons and David Johnston for facilitating very informative visits to their respective premises.
NIIAS AGM held at AFBI Stoney Road facility
Outgoing NIIAS chair Dr Marian Scott congratulates Steven Millar
The Northern Ireland Institute of Agricultural Science AGM was held this week at AFBI’s Veterinary Science Division (VSD) site, Stoney Road, Dundonald. The visit included a presentation from Stanley McDowell, Director of AFBI’s Veterinary Sciences Division and a tour of the facilities which highlighted the crucial work which VSD carry out on behalf of both DARD and industry.
The NIIAS chair for 2014/15 is Steven Millar, a NIIAS member for almost 30 years and currently head of DARD’s Agri-Food Support Services Unit. Newly elected to the committee are Basil Bayne, (Harper Adams) Declan McDevitt (Siemens) and Louise Millsopp (DARD). Vice-chairman is David Wright (Irish Farmers Journal). NIIAS represents the professional interests of agriculture and food science graduates/diplomats working in Northern Ireland.
Northern Ireland Institute of Agricultural Science