Dairy farmers lost more than a penny on every litre of milk produced last year, as costs of production soared due to the appalling wet weather, a new study has found.

According to a report published by West Country accountants Old Mill at the Dairy Show today (2 October), its dairy farming clients’ average costs of production increased by 3.69p/litre in the year to March 2013, to 38.02p/litre.

But their milk price only increased by 0.6p/litre, leading to an average 1.12p/litre loss across the client base.

“Last year was an annus horribilis for milk producers, with the perfect storm of high feed costs, awful weather and the usual lag in milk buyers responding with better prices,” said Old Mill director Pat Tomlinson.

The exceptional weather meant milk yields on identical farms fell by nearly 500 litres per cow, to average 7,145 litres. Despite herd size increasing by two cows to 197, overall milk production fell by more than 72,000 litres.

With generally poorer-quality forage and cows having to be fed more during the prolonged housing period, feed costs jumped by 2.12p/litre, totalling 11.27p of the overall production costs.

Mr Tomlinson said given the extreme weather, many farmers would not be surprised by the figures. However, he noted that milk prices received by farmers had barely increased year on year – despite all the announcements of higher standard litre prices.

“The fact of the matter is that milk processors only paid our clients 0.6p/litre more for their milk in 2013 than they did in 2012,” he added. “The sector still needs more transparency and urgency in milk pricing, because while prices have now increased more significantly on farm, it is the immediate cash position that presented the greatest challenge.”

The survey did not include anything other than the actual costs incurred by their farmers – there are no figures for unpaid labour, return on capital or theoretical land rent.

• The full results of the survey will be available at the Dairy Show, hosted by the Royal Bath and West of England Society in Shepton Mallet, Somerset, on Wednesday (2 October) and on request from Old Mill.

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