Variable costs can be similar across systems, but business managers and cows can produce better economic performance through better efficiency of input use.

Feed

Feed is the biggest single cost area. The first kilo of concentrate fed is the most economic, so be aware of diminishing returns and know which level is profitable for you. This needs to take into account the whole system; cow type, milk contract, calving pattern and milking platform.

Feed costs need to be split into two components; first the actual cost of the ingredient and second the cost of physically getting it into the cow and associative costs (for example substitution).

While not strictly “variable” cost components, certain feeding systems are inherently more expensive, incurring additional power and machinery, labour etc. Take for example the simple business structure of self-feed silage and concentrate fed in the parlour – allowing attention to detail but also simplicity and low cost – versus the feeder wagon plus parlour feeders – with increased capital costs and complication in the feeding system.

Milkbench+ analysis shows a £1 rise in feed costs results in a significantly higher increase in total costs (due to the factors outlined above). This effect is not adequately taken into account by parameters such as MOPF a cow – in relationship to dairy profitability these are meaningless.

The most profitable “response rate” is when purchased feed rate is reduced and output increases. One needs to have confidence in the quality of forage and grazing available and then challenge the cows to produce from that.

Forages

Be aware of the “substitution effect”. Do not use more expensive feed when cheaper alternatives are in adequate supply. Incentivise cows to use these by ensuring an edge on their appetite. Cows will need to be trained to use forage well, particularly grazed grass. This may take time, but the rewards are well worthwhile.

Confidence in forage/grazing quality and ability of cows to achieve desired levels of output from this is the biggest factor

Preliminary Milkbench+ results show significant feed efficiencies in block-calving systems compared to AYR, through higher grazed grass and forage use as a result of the ability to manage the herd as “one cow” throughout the year.

Don’t forget about the feed costs associated with replacements. Achieving calving at 24 months is possible with minimal concentrate supplementation if grazing and silage feeding management is top notch.

Vet and med

Cow type is important. It is essential you have the correct cow for your system. Higher-input systems can result in higher cost a cow, as a result of a combination of strains on the system and cow type.

One could achieve similar p/litre costs across systems due to the dilution effect of more litres of higher-output herds.

It is possible to gain some economies of scale with the easier management of block-calving systems, due to everything being done at the same time, for example all cows are fertility checked at the same time, rather than the need for weekly routines.

The standard of stockmanship retained in the dairy unit will relate directly to vet use and cost.

Breeding

Large numbers of cows in oestrus makes detection easier. However, there is a higher risk of fertility being negatively affected by external influences such as weather when it is concentrated in one period. This can have a serious effect on block-calving systems if things go wrong. Appropriate facilities to cope with large numbers for block insemination is crucial.

Fertiliser

Despite significant increases in the cost of nitrogen it is still cheaper to use fertiliser rather than additional purchased feed when land is available and suitable for growing forage. There is a direct relationship between the amount of grass used in a cow ration and total cost of production evident across the world. More grass equals less cost.

Therefore you should grow the correct amount of grass according to stocking rate and ensure the maximum possible is used. There is no need to fertilise above the optimum level appropriate to each farm, and be aware of diminishing response in the same way as feed rates.

Benchmarking

When reviewing costs of production, if variable costs exceed 40% of total income, this could indicate a business that needs to look very closely at major change to improve profitability and returns on investment.

Tony Evans is head of dairy business consultancy at The Andersons Centre