CHOOSE SYSTEM FOR BEST PROFIT:BY OLIVIA COOPER
AIMING FOR a high output or low input dairy system is vital, according to Kingshay, as its latest benchmarking results show farms falling in between suffer most.
Its members” benchmarking figures show that even among this progressive group total costs ranged from 15.5p to 19.3p/litre – including family labour, rent and finance. But profitability did not follow herd size, with bottom 25% herds averaging 131 cows, compared with an average of 175 cows and a top 25% of 164 cows.
“Increasing herd size is not right for everyone,” said Richard Simpson, senior manager at Kingshay. Often it means spending more on feed, but not recouping those costs through higher output. This was illustrated by a purchased feed cost of 4p/litre on average, compared with 3.3p/litre for smaller herds and 3.6p/litre for top herds.
Milk price is also vital, with the top 25% receiving 19p/litre compared with the least profitable at just 17.4p/litre. “This highlights the importance of choosing the right milk buyer,” he said.
But controlling overheads was even more important, as these varied from 7.9p/litre to 12p/litre. Producers should, therefore, choose between high output and low input systems, he explained.
A low input grazing-based system with spring calving should aim to cut production costs to just 12p/litre, said Mr Simpson. A high output herd with year-round calving and mixed forages should aim to spend no more than 16p/litre on production costs and sell into a value-added market.
“Getting costs down to these levels is a challenge, but it is important to have challenging targets. But, with the current low milk prices, few are making sufficient profit for reinvestment for the future.”
Last year members” profits ranged from 3.4p/litre to a loss of 1.8p/litre, but there was little between high output and low input systems, when handled correctly. “The ones that suffer are those stuck in the middle.”