Spring calving versus split calving: effects on farm, processor and industry profitability for the Irish dairy industry

Abstract

SUMMARYA combined farm systems and processing sector model was used to determine the effect on industry profitability of changing from the current seasonal milk supply profile to a less seasonal milk supply profile. Differences in investment costs, product portfolio, product storage and financing costs at processor level were included in the analysis. It was found, based on the underlying model assumptions, that a less seasonal supply profile allowed better capacity utilization, enabled higher volumes of high-value products to be produced and generated higher net returns (€1540·7 million) for the processing sector than the seasonal milk supply profile (€1474·9 million); it therefore warranted paying a higher milk price to farmers. In contrast, at farm level the seasonal milk supply profile resulted in lower costs and higher net farm profit, with net margin per litre being 1·6 cents per litre higher relative to the less seasonal milk supply profile. Higher concentrate, labour, silage, machinery hire and heifer replacement costs in the less seasonal supply profile relative to the seasonal milk supply profile were the main factors that contributed to the lower farm profitability. From a national perspective, including processor and farm sector interests, the seasonal milk supply profile was more profitable by an estimated €83 million; the difference in costs at farm level outweighed the increased milk price at processor level found in the less seasonal milk supply profile.