Hard-hitting evidence on the parlous state of UK dairying was released at the Dairy Event in Stoneleigh last week, and even the best dairy producers cannot afford to be complacent, said Promar International’s Andy Thompson.

“Dairy farmers are facing increasing costs and tremendous uncertainty over milk prices,” he said. “A 1p/litre fall in price would wipe out the increase in net worth seen on the average farm.”

Data drawn from the 120 farms sampled in Promar’s Farm Business Accounts (20,400 cows) showed the average dairy farm made just £29,672 profit in the year to March 2005, up just over £4000 on the previous 12 months.

Yield and herd size were unchanged, but variable costs rose 1% and overheads 7%. Profit before drawings and tax was too small to cover the demands of the business and the farming family, and borrowings rose 5%.

For the top 25% of farms, profits reached £83,163, up about £20,000 on the year. Yield per cow was unchanged, but each carried an average of 10 more cows.

Borrowings were cut and net worth rose £47,500, four times the increase on the average farm. “It is no longer acceptable to have high margins or good cost control – businesses need both,” Mr Thompson said.

“Dairy farmers need to get the real facts about how their business is performing and then make some fundamental decisions. For many, more cows and more milk are a real possibility, but only if all costs are kept in check. Otherwise they may end up running harder just to stand still.”