The UK is unlikely to meet quota until at least 2011 despite milk price increases, according to a report from Andersons.

Francis Mordaunt, the farm consultant’s head of research, estimated the UK was likely to miss quota this milk year by 700m litres, compared with 400m litres last year, and by 300m-400m litres in 2008/2009.

Even though some farmers were already trying to respond to higher prices, there was a limit to how quickly they could increase production because there were just not enough cows in the UK, said Mr Mordaunt.

“To increase numbers you’re looking at three years from insemination to a calving heifer and you can only boost output by feeding to a certain extent,” he said.

Buying animals from abroad could be an option once foot-and-mouth restrictions were removed, said Mr Mordaunt, but higher milk prices across the continent meant European farmers would also be looking for more cows.

Based on a milk price of 25p/litre, Mr Mordaunt said profit after rent and drawings but before the Single Payment on Friesian Farm, the firm’s model dairy unit, was set to hit 0.5p/litre this year and then rise to 2.6p/litre for the 2008/2009 milk year (see table). This compares with a loss of 1.4p/litre last year.

“Dairy farmers should be thinking strategically about their businesses”

Although this meant farmers were in the rare position of being able to invest again in their businesses, they needed to be cautious, especially those in areas heavily affected by the Water Framework Directive, said Mr Mordaunt.

“I’m hopeful milk prices won’t go back to where they were because of world demand, but it’s not impossible that in three years things will look quite different. There are still too many people with high-cost systems.

“Dairy farmers should be thinking strategically about their businesses and invest if they are staying in long term and not get carried away with expensive parlours or machinery that will not produce a return,” he said.

Fresian Farm costings

P/litre 

2006/2007

2007/2008

2008/2009

Milk 

18.5

21.5

25.0

Culls & Calves 

1.5

1.5

1.5

Output 

20.0

23.0

26.5

Costs (inc drawings) 

21.4

22.5

23.9

Surplus from production 

(1.4)

0.5

2.6

SPS (and ELS) 

2.4

2.2

2.1

Surplus after SP

1.0

2.7

4.7