A Step by Step Guide to Setting up a New Dairy Farm - …

1 4523chapter9chapter A step by step Guide to Setting up a New Dairy Farmby Padraig French IntroductionEstablishing a new Dairy farm is a very significant financial and time commitment which requires detailed planning and management. Prior to undertaking such a project you should be very clear on your goals for the farm and why you are undertaking the project. Because of the large capital investment required it is essential that very detailed plans are developed, analysed and stress tested. What are the steps involved in Setting up a new Dairy farm ?

2 Section 21469chapterWhat are the steps involved in Setting up a new Dairy farm ? step 1 Develop a physical plan for the farm to include milking and grazing infrastructure, animal housing and slurry storage.(a) Decide on the number of cows that will be milked based on the size of the farm and the grass growth potential of the farm (see chapter 5)(b) design a milking facility (see chapter 22), winter housing facility (see chapter 24) and grazing infrastructure (see chapter 21) appropriate to the number of cows planned and the farm size.

3 (c) Decide on an operational plan for the farm , who will do the work? Who will manage the farm ? step 2 Develop a capital budget for the farm to quantify the total cost of converting to an operational Dairy farm .(a) Estimate the cost of each item in the development plan, speak to other farmers who have undertaken similar scale conversions and get quotations from builders/suppliers. See table 1 as an example from the Greenfield Dairy farm in Kilkenny.(b) Develop a stock budget based on the total number of stock including replacements to be bought, include also cost of disease testing , transport, vaccinations and any other cost associated with keeping the animals until the farm becomes operational.

4 (c) Who will project manage the conversion of the farm ? Will there be a cost or opportunity cost associated with the project management?A step by step Guide to Setting up a New Dairy Farm14723chapter9chapterA step by step Guide to Setting up a New Dairy farm (d) Allow a contingency of at least 15% on the capital budget for unforeseen costs.(e) Decide how the development costs will be funded; how much equity is available from sale of existing stock/assets; how much will have to be borrowed? Ensure there is adequate working capital available to start up the operation of the farmTable 1 Capital budget for the Greenfield farmItem Description Projected Actual Stock 265 lactating cows 01300 0344,500 0389,268 70 heifers @ 01200 0110,500 084,000 Reseeding of farm 117 ha, one pass till, sow, roll + grass seed + fertiliser 035,000 048,589 Fencing 20,000 m @ 017,500 017,617 Water supply 40 water troughs + 7 km water pipe laid + water store 026,500 029.

5 040 + Boring the well Infrastructure Stand off pad, Earthen bank tank 0176,400 0326,738 Roadways, Site work, Gate, Tank fencing, Bark Mulch, Head feed, Calf shed, Gates, Yarding Milking parlour 30 unit herring bone shed + Dairy + collecting yard/ 0196,140 0228,709 and office, wiring, plumbing, heating Silage Slab Silage bases 016,300 Feed bin 04,000 Electricity supply 3 phase transformer + connection fee 09,742 08,584 Machinery Jeeps and tractor 020,000 016,230 Labour Labour from Start to December 03,500 Planning Drawings + site assessment + mapping + planning application + council development fee 019,000 024,800 Office Computer, farm package, phone connection, broadband etc 05,000 025,688 Company Set up plus legal 05,705 Contingency 10 % allowance to allow for unexpected costs that may arise 099,968 08,669 VAT paid 086.

6 000 Total 01,316,408 VAT back 077,400 Net capital 01,100,000 01,239,008 step 3 Develop an operational budget for the farm to quantify the total costs and total income generated annually.(a) Use table 2 as a Guide or the Teagasc 6 year budgeting tool to forecast cash inputs and outputs and profitability.

7 (b) Net profit plus opportunity cost of unpaid labour or land minus debt repayments divided by the total capital investment will give the return on capital. (c) A target return on capital by year 5 should be >10% assuming an average milk price(d) When the budget is complete the plan should be stress tested at low milk price to ensure that the business is viable in years of low milk price particularly in the early years after Milk price ( /kgMS) 4 The business plan should be strss tested with low milk price to determine if the business can withstand very low milk price years Calculations 2017 2018 2019 2020 2021 2022 farm Size (ha) Cow numbers Be conservative on stocking rate in initial years unless sure of the growth capacity of the farmMilk sold /cow (kgMS) First lactation animals will have much lower milk yields, so if starting with heifers this should be factored in.

8 When new herds are assembled, it will take a number of years for the herd to reach optimum productivityMilk Solids kg/Ha Stocking rate * MS/cow T Milk solids Milk solids /ha * total ha Sales 1 Mil k Milk price * total milk solids 2 Calves Budget higher calf mortality in the initial years 3 Cull cows Culling will be higher in in initial years as the herd settles down A= SUM(1 to)

9 3) Total Inventory +/- 4 Gross Output B=(SUM(A&4) VARIABLE COSTSC ontracting 5 Silage This can be calculated from the cow requirements above, the grass silage yield and the rate/ha for cutting. 6 Slurry spreading 7 Hegecutting 8 Reseed The initial reseeding of the farm should be budgetted in the capital budget 9 Soiled water spreading A1 10 Contractor Other Approximately straws needed per replacement heifer calving down.

10 11 AI Straws 12 Technician Service 13 Tail paint/ heat detection 14 Tags Tag price + BVD testing 5/cow) 15 Dead A Collection Allow for higher cow and calf mortality in the initial yearsDairy 16 Supplies 17 Milking Machine costs 18 Milk Rec Feed 19 Dairy cow Cow numbers * target conc. / cow * conc. Price/tonne 20 Silage plastic Include silage bale and pit plastic 21 Minerals Dry cow, lactating cow & youngstock minerals 22 Straw 23 N.