26 February 1999


AS we reach the end the quota year, and for many another financial year, it is one that most will be glad is over.

It is all too easy to dwell on the political and price difficulties of 1998. But considering business strengths and weaknesses – and reacting to them – may prove more valuable use of time.

Building on strengths and tackling weaknesses should allow you to enter into the next quota year with profit improvement in mind.

Increasing cow numbers or boosting yields can often seem an obvious answer. But it is vital to calculate the real effect on profit. Neither of these paths is always as profitable as many would like to believe.

A move in the opposite direction could pay; decreasing cow numbers may save labour or cutting yield/cow may lower production costs a litre, making these options more profitable when the leasing price is too high.

The chief concern with expansion is that many farms do not have the cost-structure necessary to push yields and lease quota profitably. To work out what is right for you, experts in this Update advise checking whether the last 1000 litres a cow of production is worthwhile.

That is vital because although prospects for milk price may have increased a little, prices are likely to remain low for some time. Businesses most likely to survive will be those that find a way to produce milk profitably within current labour, climate and building constraints.