This post first appeared online at http://www.thatsfarming.com on the 23rd August 2017
When I started delving into the Irish agri-food industry, an early finding was a preference for focusing on partial farm-production costs. For some reason which, in my less cynical moments, I put down to an academic desire to compare one farm with another or one national industry with another, like with like, all the talk was about how low Ireland’s direct production costs were. Of course, if you wish to go around promoting the idea that Ireland is a World-leading, low-cost producer of milk, it is the go-to data, it provides some great rallying calls and media copy.
Thankfully, but very belatedly, there is now some effort being made to disseminate more in-depth economic data on the costs of production by including an imputed cost for the farmer’s own labour; hitherto something that was left out of the equation, presumably because every farm is different, or so we like to think. Sadly, the partial cost approach did not just exclude family labour, the major labour source in Ireland, it also ignored the costs of land and capital for the same reason.
It is not as if full-costings had not been done. Farm business survey work is routine across the EU and, in Ireland, sporadic surveys are done into the international competitiveness of Ireland’s dairy farming. In a nut shell, the latter highlight that Ireland has low direct costs per litre of milk but also that this advantage was negated when all labour, land and capital costs were factored in. It is only when farms are significantly above average size, that Irish dairy farms are internationally competitive, all costs considered. My own calculations concur with this.
So, were those promoting an expansionist agenda for the dairy sector guilty of cherry picking their data sources? Or was it just the desire to be positive and promote a best in the world image? That is a judgement that I will leave to others as I, as a blow-in, could not possibly comment.
What prompted me to return to my partial costing hobby horse was the recent highlighting of dairy-sector labour shortages. I have read about the pilot scheme to incentive the unemployed to milk cows and proposals that the Government should provide milking visas to non-EU nationals and create a Sunday-off relief-milking scheme to lessen the work load. I am still awaiting to hear that convicted criminals will be sentenced to years of hard milking.
It is, of course, not a subject to jest about as milking every day, usually twice a day, is a tough way to make a living. It is relentless and farmers need to be able to take a break from the milking routine. To do so means incurring relief milking costs and they are costs come higher at weekends when, not atypically, the second [or primary] income earner in the farm household gets time away from work. This a just one reason why labour planning is such an essential part of farm business planning. It is no less vital to understanding your industry than the variable costs of growing grass.
A few of my farming correspondents have, rightfully, pointed the finger at the pivotal problem, the farm economics. It has been exacerbated recently by a low milk price. Nonetheless, the question is, when is the labour shortage going to be resolved in the only way it truly can be, by farmers being able to afford to reward people with an attractive enough payment to incentivise them to want to milk cows? Is it going to happen at 30cpl, at 35cpl or maybe at 40cpl?
The tragedy in this is that potential labour issues should have been analysed and factored in before rapid post-quota expansion was mooted as the way forward for the dairy industry. Likewise, for land and capital. I would also add to that list demand and supply-side market analysis but that is a story for another day. Full, in-depth analysis would almost certainly have contradicted the we are globally-competitive, low-cost milk producer mantra and brought into question the headlong rush to follow the New Zealand model, be it in milk production, milk processing or market focus. Full-cost economic analysis would have shown that the farm-scale differential would mean that following New Zealand’s approach would not create a sustainable Irish milk-production sector.
One likes to be positive, but finding sustainable solutions for the Ireland’s dairy sector labour shortage is going to be difficult. It is because the problem goes beyond finding the willing and able; it is about having invested magnificently in targeting markets that are unlikely to yield the farm-gate milk price that will make the economics of milk good enough to pay sufficient money to attract the needed staff. It is one hell of a conundrum. And as with so much with the way farming is evolving these days, the consequences will fall hard on the farmer. And that would, probably, never have happened if there had not been so much data cherry-picking in the first place.