Opinion: ‘Labour was always a key issue for dairying’


The current labour problems have not come out of nowhere. If the dairy sector had been properly evaluated say five years before quotas were removed, they could have been factored in.

Opinion: ‘Labour was always a key issue for dairying’

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The current labour problems have not come out of nowhere. If the dairy sector had been properly evaluated say five years before quotas were removed, they could have been factored in.

Apparently, nobody considered the need for labour on dairy farms when planning the great expansion. Well they did, it was trumpeted that expansion would create 6,000 new jobs.

Wind the clock forward and we find that we now need those 6,000 people. But it appears that locals are not finding the work, the conditions, or the career prospects attractive. And the situation is now so bad that some of these folks will now have to be drafted in from outside the EU. Will they be attracted by grand salaries and great living conditions? I expect not.

More likely they will be recruited from the World’s poorer nations, offered temporary housing and asked to work longhouses for rather little. And it is not the dairy farmer's fault, it is just what they can afford. And to be fair, the working conditions may not be a great deal better for the farmer. Sadly, it is a situation that only reflects the system that was the foundations of the expansion.

Concerns

To backtrack, when I reviewed Food Harvest 2020 in 2014, I rapidly smelt a rat. For a highly experienced farm business economist who had spent 25 years analysing farm business performance, my instincts were to start by evaluating the Irish dairying system. All I was hearing and reading was about how cost-effective and internationally economically competitive it was. But it was evident that those assumptions were based on partial costings that ignored the full costs of production and, hence, the capital and annual costs associated with, especially, labour and land.

When teaching, I used to highlight the importance of using a diversity of key performance indicators. Business analysis was a major part of our curriculum because it is so important. And a key part of that is understanding how to recognize which KPI’s to employ. Of course, some would relate to yield, others to income, but many would relate to labour, land and machinery usage. Given my knowledge of the Irish farming sector’s farm scale, it was these that concerned me most; not least when I realised how they were being ignored by the emphasis on partial, variable-cost-focused budgeting.

Labour Problem

The current labour problems have not come out of nowhere. If the dairy sector had been properly evaluated say five years before quotas were removed, they could have been factored in. In June 2011, a report was published by Teagasc entitled “Study of the International Competitiveness of the Irish Dairy Sector at Farm Level” and that is still worth reading if you can find the carpet it was swept under of course. I commented extensively on it in a blog post back in 2015.

One reason for extensively publishing on the Web is that one lays an evidence trail that puts an immediate stop to the ‘it is easy in hindsight’ excuse. The writing was on the wall back in 2011; well it was until it got painted over in some bovine-green colour. Clearly what was written was so subversive that it was not to be seen by the farming populace. If you can find the wall, it is probably adjacent to the carpet, and employ some art-world forensics, you will find below several layers of paint not only the writing but also a large pre-chosen-history cave-painting depicting the rat.

Figures

To reproduce some of the numbers from my 2014 data-crunching Excel file. These figures focus on milk solids per labour unit [some are more accurate than others, depending on the quality of the available data at the time]. Importantly they do not reflect farm-gate MS value differentials.

In 2012/13. New Zealand produced 49 tonnes of MS per dairy farm labour unit. In the Netherlands, it was 54 tonnes. At the time, Denmark, England, Scotland and Australia were around the 70 tonnes mark. Slightly later, in 2014 the average Irish herd, if it was a one-person operation, produced 22 tonnes, and that was up from 17 tonnes in 2009. Of course, these numbers reflect massive herd size differentials, but those here sizes were and remain the reality. They massively impact upon labour productivity; Ireland cannot balance such with cheap local or free family labour. Alternatively, ask yourself what low-cost grass is needed to balance our such a fixed-cost differential?

I then extrapolated forwards to 2020. My estimates were for NZ to be at 59 tonnes, the Netherlands at 74, Denmark at 98 and England 91. If the average Irish herd was a one-person-only 80 cows unit by 2020, the MS production per labour would be 30 tonnes. Of course, many herds will be bigger, but will labour productivity rise accordingly? Will the land be consolidated well enough and sufficient labour-saving investment be made to allow the average Irish dairy farm to rise above 80 cows per labour unit? Just where will the labour economies of scale be found?

Scaling-up

A great deal of emphasis has been placed upon scaling up Irish herds; even if that emphasis does ignore the static, highly-fragmented local land market. And not forgetting that for a land-intensive, highly-stocked NZ-style grass-based model, access to land and large blocks of it is crucial. Growing grass cheaper than anyone else has been the dream behind dairy expansion, but it is a dream that ignored so many economic fundamentals. In the cold light of day, the dream is a mirage.

One recalls talk around 2015, that Ireland needed to go to 140-cows per person [as per NZ]. That was pie in the sky? Yes, some farmers have expanded dramatically but to do so in a robust and resilient fashion is expensive. Also, are they creating the working conditions that make milking cows attractive to potential employees?

Some will manage to square the circle, but one wonders if when producing low-value milk for commodities, whether the numbers will ever truly add up for everyone. And if they don’t, the Irish dairy sector can whistle in the wind when it comes to human resources.

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