Nick Whelan, guest speaker on the KPMG / Irish Farmers Journal report launch webinar and CEO of the UK’s largest dairy co-op Dale Farm, shares how margin sustainability is the greatest threat to farmers and how the co-op is working to solve this.
Nick Whelan is a man who doesn’t think in days or months or years. He thinks in decades. As CEO of Dale Farm, the UK’s largest farmer-owned dairy co-op, Whelan takes a long-term outlook for the prospects of the co-op and its farmer suppliers.
“When I think about sustainability, I see sustainability of margin across the supply chain as a major problem. The biggest threat to our business here in Dale Farm is, who will be milking cows in 15 to 20 years’ time to supply the co-op,” says Whelan.
To improve the economic sustainability of its dairy farmer suppliers, Dale Farm is going back down along its supply chain and working directly with some of its farmers to try and improve on-farm inefficiencies. “As a co-op, I believe we have a role to help our farmers improve their economic sustainability. Some don’t agree we should be doing this but it starts by building trust with our farmers and credibility. Then momentum will come,” he says.
“The big question is, how to raise the productivity of agriculture. However, the potential for efficiency gains at farm level is absolutely enormous,” adds Whelan.
Dale Farm recently started a research trial with 160 of its farmer suppliers, with the aim of improving their bottom line by a minimum of 2p/l purely through efficiency gains. The trial is taking a simple measure of feed concentrate efficiency on these 160 farms, otherwise known as margin over feed.
According to Whelan, the trial has uncovered some huge variations across different farms and, in general, revealed that many farmers are overfeeding their cows. The trial also showed a differential of 3p/l in the margin over purchased feed between the top 25% of farmers and the bottom 25%, which is a difference of £700/cow (€805/cow) between top and bottom.
By helping farmers to narrow this £700/cow gap, Dale Farm hopes to improve the economic sustainability of its suppliers. Outside the farm gate, the co-op has a number of other initiatives to help support margins acrros the supply chain.
Since the end of EU dairy quotas in 2015, dairy markets have become more volatile as European milk production has expanded. To smooth out some of this market volatility, Dale Farm is trying to bring its retail and B2B customers muc closer to the farmer by creating fixed contracts for its products, particularly cheddar, which can take over a year to mature after the milk has been bought from the farmer.
This is a win-win scenario for farmers and buyers as it guarantees supply for large supermarkets while it also allows farmers to de-risk their business by entering a percentage of their milk into fixed milk price contracts with the co-op.
Processing close to 900M litres of milk per annum, Dale Farm is a critical route to market for dairy farmers in Northern Ireland.
Dale Farm has not been idle on the other side of the sustainability coin either. Like many dairy processors on the island of Ireland, Dale Farm continues its investment in and transition to renewable energy.
The standout investment in this area has been a 4.9MW solar farm that the co-op has developed on 37 acres adjacent to its milk processing plant in Dunmanbridge, Cookstown, Co. Tyrone. According to Whelan, the solar farm generates 25% of the electricity requirements of the Dunmanbridge facility, which produces 60,000t of cheddar cheese annually, as well as operating two driers for milk and whey.
The co-op expects that the solar farm will reduce its carbon footprint by 20% and delivery several million pounds in savings on energy costs over 20 years. Whelan says the business case for investing in its own solar farm was win-win.
Not only did it reduce its carbon footprint by producing renewable electricity but it also allowed the co-op to cut its reliance on standard electricity from the Northern Ireland grid.
On top of the solar farm investment, Dale Farm has implemented a major lean programme across the business, which has deliverered major cost savings for the co-op.
The lean manufacturing programme has focused on energy efficiency within the co-op's processing plants with heat recovery systems recycling energy from steam for be used over and over again.
The energy efficiencies achieve through its lean programme has allowed Dale Farm to cut its electricity consumption per tonne of output (KWh/tonne) by 17%. This has also resulted in an 8% reduction in the co-ops C02, emissions per tonne of output (kg of C02/tonne).
Processing close to 900m litres of milk per annum, Dale Farm is a critical link in the chain and route to market for dairy farmers in Northern Ireland. While profitability in the short-term is important for any business, the co-op is also focused on building long-term economic sustainability within its supply chain, so that its farmer members can pass the business on to the next generation.
Thinking 20 years down the line to 2040, Whelan wants Dale Farm to help its members achieve greater economic sustainability so the co-op will still be supplied by over 1,000 different farms across Northern Ireland for many years to come.
Northern Ireland has developed a resilient and innovative agribusiness sector, which does a superb job at feeding both the domestic and global market and has continued to do so during the lockdown. Its success is the result of work by industry, government and academia, including DAERA, AFBI, UFU, CAFRE, NIFDA, the Global Institute of Food Security at Queen’s and Food NI. They have helped create not just a highly efficient agribusiness sector, but one which is sustainable and makes sure to care for the environment while feeding the world. In the past, profit and the environment may not have been comfortable bedfellows for some industries, but Northern Ireland’s agribusiness sector is making sure both are strategic priorities. That is important for the future as the environment will come even more into focus with the rollout of DAERA’s first Environment Strategy for Northern Ireland.