Farmgate milk prices would need to rise to 31.9p/litre from 1 October to maintain current dairy margins to March 2013, warned The Dairy Group.

Results from the group’s MCi Report show margin over purchased feed (MOPF) has started to fall, and the forecast predicts that by March 2013 it will have fallen by more than 10% to £1,505 a cow.

Dairy margins forecast   

   Actual  Forecast  % change
   March 2012  March 2013  
 Rolling yield  8,132  7,932 -2.5%
 Rolling milk price p/litre  27.9  27.3  -2.2%
 Rolling feed cost £/cow  596  665  +11.5%
 Rolling feed cost p/litre  7.3  8.4  +15%
 Rolling MOPF £/cow  1,680  1,505  -10.5%

Assuming there are no further milk price cuts, milk price is forecast to reduce by 0.7p/litre to 27.3p/litre, while purchased feed cost is expected to rise by 0.9p/litre to 8.4p/litre. This is down to an expected increase in purchased concentrate costs from £219/to in May 2012 to an average of £275/t by December 2012.

“The effect of the forecast lower milk yield and the higher purchased feed cost is to reduce the margin a cow by £175 to £1,505 a cow by March 2013, equivalent to £35,000 a year for our average herd of 200 cows,” said The Dairy Group director, Ian Powell.

Producers can take a number of steps to mitigate this, he added. These include: assessing forage stocks and planning forward for forage requirements; forage analysis to determine quality and how feed should be fed to different group animals; and looking at different sources of protein and energy to see which offer the best value for money when balancing home-grown forages available.

“While these steps may help offset some of the fall in forecast dairy margins, it is bound to be a challenging winter for dairy farmers,” added Mr Powell.

The results, which are collated with data from the company’s dairy management system, also compared May 2012 to May 2011.

Rolling average milk yield decreased by 37 litres to 8,075 litres a cow, while average feed rate remained the same at 0.32kg/litre. Average milk price was up 2.7p to 28.1p/litre and the rolling MOPF was £147 higher at £1,669 a cow – the MOPF/litre was 1.9p higher at 20.7p/litre.

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