Irish Dairying – A Competitive Industry?
description
Transcript of Irish Dairying – A Competitive Industry?
![Page 1: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/1.jpg)
Irish Dairying – A Competitive Industry?
Fiona Thorne & Billy Fingleton
Teagasc Glanbia Regional Seminars 2006
![Page 2: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/2.jpg)
Overview Background & Rationale
• Methods
Competitiveness Results
• FADN Results
• Productivity Analysis
• Inter-Country Cost & Returns
• IFCN Results
• Inter-Country Cost & Returns
• Implications in a reduced milk price scenario
Distribution of costs & returns for the Irish dairy sector
Conclusions & Implications of findings
![Page 3: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/3.jpg)
Background & Rationale
Why it is important to be competitive?
•WTO
•CAP Reform
•EU Enlargement
Competitiveness is about survival & not just
about being the best
![Page 4: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/4.jpg)
Questions answeredQuestions answered How competitive are Irish dairy farms?
• Within the EU-15?
• Within the international world of dairy production?
• Distribution of costs and returns within Ireland?
What is the future of Irish dairy production?• In the short to medium term?
• In the long term?
• In the context of WTO reform?
![Page 5: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/5.jpg)
Methods
Measures•Profit•Partial productivity indicators
Cost elements•Cash costs•Economic costs
![Page 6: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/6.jpg)
Cash & Economic Costs ?????
Cash Costs Economic Costs
PLUS
![Page 7: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/7.jpg)
Methods
Measures•Profit•Partial productivity indicators
Cost elements•Cash costs•Economic costs
Data•Farm Accountancy Data Network• International Farm Comparisons Network
![Page 8: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/8.jpg)
Cost Competitiveness & Productivity of Irish Dairy
Production (1996-2003)
Cost Competitiveness & Productivity of Irish Dairy Production (1996-2003)
![Page 9: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/9.jpg)
Productivity of Irish Milk Production (‘96-’03)
Ireland relative to the average of all countries (Average = 100)
0
50
100
150
200
Milk yd/cow kg Milk solids/cow kg
Inde
x (I
rela
nd =
100
)
Belgium Denmark France Germany Ireland Italy Netherlands UK
![Page 10: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/10.jpg)
Productivity of Irish Milk Production (‘96-’03)
Ireland relative to the average of all countries (Average = 100)
0
50
100
150
200
Milk yd/cow kg Milk solids/cow kg
Inde
x (I
rela
nd =
100
)
Belgium Denmark France Germany Ireland Italy Netherlands UK
![Page 11: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/11.jpg)
Productivity of Irish Milk Production (‘96-’03)
Ireland relative to the average of all countries (Average = 100)
0
50
100
150
200
250
Stocking rate LU/ha Milk prod /lab. Units
Inde
x (I
rela
nd =
100
)
Belgium Denmark France Germany Ireland Italy Netherlands UK
![Page 12: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/12.jpg)
Productivity of Irish Milk Production (‘96-’03)
Ireland relative to the average of all countries (Average = 100)
0
50
100
150
200
250
Stocking rate LU/ha Milk prod /lab. Units
Inde
x (I
rela
nd =
100
)
Belgium Denmark France Germany Ireland Italy Netherlands UK
Relatively low compared to competing countriesBUT, only part of the story
![Page 13: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/13.jpg)
Productivity Levels conti…. 50-99 dairy cow category
•Rankings similar but disparities reduced Rankings over time (1996-2003)
•Average size farm:
•Milk solids per cow
•Stocking rate per hectare
•Milk solids per hectare
• ‘Larger’ dairy farm:
•No significant relative trend
•But +ive trend for milk yields & solids per cow, & labour prod.
![Page 14: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/14.jpg)
Costs for Specialist Dairy producers per output value (1996-2003)
0
20
40
60
80
100
120
140
% o
f to
tal dair
y o
utp
ut valu
e
Total Cash Costs Imputed Owned Land Costs Imputed Labour & Other Costs
Average Irish farm: second lowest cash costs but the second highest total economic
costs;Larger Irish farms: on a par with average
total economic costs;Owned land important in longer term.
![Page 15: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/15.jpg)
Costs for Specialist Dairy producers per kg of milk solids (1996-2003)
0
1
2
3
4
5
6
per
kg o
f m
ilkso
lids
Cash Costs Imputed (owned) land cost Non land imputed costs
1
Lowest cash costs;On a par with average total economic
costs;Owned land important in longer term.
![Page 16: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/16.jpg)
‘Average’ versus ‘Larger’ Dairy Farms
versus
![Page 17: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/17.jpg)
Costs for ‘Large’ Specialist Dairy producers per kg of milk solids (1996-2003)
1
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Costs p
er k
g o
f m
ilk s
old
is
Total cash costs I mputed (owned) land costs I mputed (owbed) non land costs
Sub sample of larger farms:Lowest cash costs
AND lower than average costs total economic costs;
Owned land important in longer term.
![Page 18: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/18.jpg)
€ economic costs per kg of milk solids:
‘Large’ Irish farms relative to the average
y = -0.1032x + 206.21
R 2 = 0.8306-0.8
-0.7
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Co
sts
rela
tive t
o t
he a
verag
e
![Page 19: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/19.jpg)
Looking outside EU-15
![Page 20: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/20.jpg)
A look at profit margins…..
![Page 21: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/21.jpg)
Farm income as per cent of total returns:
Ireland v other non EU countries (2004)
-15%
0%
15%
30%
45%
60% On an international basis:Profit margins for the ‘large’ Irish dairy farms are one of the highest in the world
![Page 22: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/22.jpg)
Cash & Economic Costs ?????
Cash Costs Economic Costs
PLUS
![Page 23: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/23.jpg)
Total Costs and Returns of the Dairy Enterprise: Ireland v other non EU countries (2004)
US$ per 100kg milk (ECM)
0
10
20
30
40
50
60
70
80
90
Cash costs Economic Costs Dairy Enterprise Receipts
Positive outlook even in the longer term, for larger size dairy farmsCompetitiveness is about survival & NOT about being the best.
![Page 24: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/24.jpg)
Milk Price & Competitiveness - WTO Implications
• Current Policies
• Even under current policy milk price declining;
• Extreme WTO reform
• To reduce milk price further;
• But, Ireland not adversely affected compared to other EU
countries;
•Volume of butter exports (twice World price) versus
•Volume of SMP (equiv. to World price) & cheese
• Ability to compete similar to longer term outlook presented.
![Page 25: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/25.jpg)
Farm Quintiles by Cost Levels & Related Net Margins
0
5
10
15
20
25
Very lowcosts
Low costs Mediumcosts
High costs Very highcosts
Cent
per
litr
e
Direct Costs Overhead Costs
Source: B. Fingleton, (based on 2002 NFS)
![Page 26: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/26.jpg)
Discussion & Conclusions
![Page 27: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/27.jpg)
Conclusions Productivity Indicators
•Partial productivity indicators for Ireland were ‘worrying’;
•Land productivity for average size Irish farms declined from 1996 – 2003;
•BUT, Total Factor Productivity is what is N.B.
Very competitive on a cash cost basis
• Ireland had one of the lowest costs per unit of production;
•Positive outlook in the short to medium term;
![Page 28: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/28.jpg)
Conclusions Deterioration when total economic costs are calculated:
• Implications for competitiveness in the longer term;
•Warning signal for average size Irish dairy farm;
•AND, ‘large’ Irish farms more competitive in the longer term;
Important considerations:
•Relatively low scale primary agricultural activity
•BUT, as average size increases:•Better able to cope with a cost price squeeze.
•Scope for increasing productivity levels.
![Page 29: Irish Dairying – A Competitive Industry?](https://reader036.fdocuments.net/reader036/viewer/2022081520/56814d27550346895dba5aa6/html5/thumbnails/29.jpg)
Key Take Home Message
Short to medium term outlook is positive
AND in the longer term, as farm size increases, the competitive outlook is also positive.