1 October 1999

Benchmarks are a useful cost guide

PRODUCERS need to be more aware of what it costs to produce a litre of milk, according to consultants manning the farmers weekly, FWi and MDC-sponsored Spotlight on Profit Cost Clinic.

Axients south-west consultant Richard Foster agreed that many producers did not know their costs of production, and in some cases this included feed costs.

But working out costs allows producers to see how they compare with industry standards, said Wilts-based Andersons consultant James OMahoney.

"Benchmarking is a useful guide to how your business is performing and helps identify areas of weakness. These can then be addressed by setting targets and monitoring performance against these targets.

"When targets arent achieved, then focus on why they havent been reached. It may be that the targets are unrealistic and need to be reset."

In general, he said producers visiting the clinic were looking at fixed costs, which were more easily influenced than variable costs. For example, quota leasing was often a large cost.

"Rather than producing more milk and leasing or buying-in extra quota, look at the bottom line. Set some objectives for your business. Decide where it is going as a business and what you need to draw to live on."