Grass Investment Stacks Up
Any business decisions should be well planned and based on long-term returns, which makes investment in better grass growth and utilisation a sensible decision for all, according to Moorepark senior research officer Laurence Shalloo.
Speaking at the Positive Farmers Conference in Cork, Laurence explained that Ireland’s 2015 National Farm Survey (NFS) shows that the top 20% of producers ranked on profit per hectare, utilised more grass, had lower costs and a greater net margin (see table).
“For every euro coming in, the top 20% were keeping 52 cents. 81 cents (for every euro) were going out on costs for the bottom 20%,” he explained.
Survey data showed huge variation in grass grown, with some farms growing 10t/ha and another growing 18t/ha. The same could be said for grass utilisation, with some farmers using around 2t/ha, and others up to 12-14t/ha. Laurence believed much of the variation was due to management with little regional effect. He said that there was much to be gained from improving grass utilisation and emphasised research findings that showed every additional ton of grass utilised/ha could increase net profit €180/ha (£158/ha).
Soil testing and addressing any imbalances in pH and Ps and Ks, were high on his list of priorities to drive performance. He ran through various scenarios to highlight the potential financial returns from investing in varying expansion options. This used the baseline scenario of growing 10.3tDM/ha and utilising 7.9tDM/ha with 90 cows and 50ha, with all replacements reared on farm.
Modelling work showed that the scenario where grass growth was increased to 14.3tDM/ha by undertaking improvements such as addressing soil fertility and reseeding, gave the best return. This example also increased grass utilisation to over 11.9tDM/ha, moved heifers off the platform leased an additional 20ha and increased cow numbers to match production of feed. Expansion investment cost €413,571.
This doubled the return on overall investment from 2.4% to 5.3% versus the worst performing scenario in terms of profits. In this example, cow numbers were increased without improving grass growth, feed was bought-in and labour increased, with the expansion investment costing €107,343.
The scenario was the only modelled example where the expansion process reduced the profitability of the business, with the return on investment of the expansion process standing at -1.6%.
For the best performing scenario, the return from the overall expansion process stood at 14.6%, which compared favourably to a target of around 10% and a national average in the NFS of 2.7%.
Laurence also drew on NFS results to show that investing in grass compared well with investing in expensive technologies.
“We can get a return of 15% by investing in grass productivity or invest in technology, like AMS (Automatic Milking Systems) and get a return of under 0%,”he added.