DAIRY-ONLY farms now need to produce more than 1m litres of milk a year to remain viable, says Neil Blackburn at Kite Consulting.

The finding is based on a survey of Kite clients, which showed that dairy farmers have increased their herd sizes and ramped up milk production over the past three years.

The average Kite-costed farm now milks 183 cows and produces 1.5m litres a year, after adding 31 head in the 36 months to September.

The top 10% of farms surveyed has put on an extra 26 animals since September 2002, pushing herds to an aver<00AD>age of 212 head producing over 2m litres each year.

Average herds generate a margin over purchased feed of almost 230,000 – up by 23,000 on 2003 and by 51,000 since 2001. This works out at an average margin of nearly 15p/litre. But top 10% performers make almost a penny more a litre with a MOPF of 332,000.

“With many farms unable to cut costs further, the only recourse is to produce more milk,” said Mr Blackburn. “The indication is that the big farms are continuing to expand.”

Another specialist consultancy firm, The Dairy Group, predicts the rolling 12-month farm-gate price will end 2004 at 18.5p/litre, compared with 18.02p/litre a year ago. And director Nick Holt-Martyn believes ex-farm returns should firm slightly to 18.6p/litre at the end of the quota year.

This month”s Milk Price Review includes Dairy Crest”s cut of 0.25p/litre in the base rate of its liquid agreement.