16 June 1995

Butterfat cuts both ways

Lower butterfat levels since ADAS took over the testing last autumn has prompted a change of policy for one Sussex dairy farmer.

Philip Clarke investigates

SUPPRESSING butterfats this spring has helped Sussex dairy farmer Joanna Binnington to an extra 11,500 litres of quota in only two months, worth an additional £2700 in milk sales.

"Many farmers seem to forget that the butterfat regulation works both ways," she says. "We have a tradition in this country of producing to lift fats. But this is now costing the industry dear."

In particular, she points to the UKs £60m super-levy bill for 1994/95, all of it accounted for by excess fat rather than too many litres.

"Too much money has gone out of the industry at a time when we should be investing. We need to get costs down before the inevitable fall in prices," she says.

Mrs Binnington has farmed the 190ha (475-acre) Thakeham Place Farm since 1981. She runs 170 pedigree Holstein Friesians and achieves an average yield of 7000 litres. Projected margin over concentrate this year is £1400 a cow and the butterfat base is 3.96%.

The real financial benefit of cutting fat levels first hit home last autumn. October production, sold to the old Milk Marketing Board and analysed by Central Milk Testing, showed a butterfat content of 4.11%. The next month, with the milk now sold to Unigate and tested by ADAS, a fat level of 3.73% was recorded.

"This was below our butterfat base and released an extra 4632 litres that month for free."

Closer examination of the figures convinced Mrs Binnington that supressing fat was the way to go. The worked example (table 1) demonstrates her point:

Farmer A matches his quota and 3.96% butterfat base exactly. From the sale of 500,000 litres of milk, at 2.54p/litre for fat and 4.28p/litre for protein, he makes £119,850.

Farmer B goes 10 points over his butterfat base. Although this nets him an extra £1250, taking total revenue to £121,110, the butterfat adjustment (of 0.18% more litres for each point over base) takes him 9000 litres over quota.

"These are not production litres for which he will be paid, but can be thought of as penalty litres," says Mrs Binnington.

Farmer B can either:

&#8226 Pay super-levy at about 30p/litre – total cost £2700.

&#8226 Lease in an extra 9000 litres at 12p/litre – total cost £1080.

&#8226 Reduce output by 9000 litres – lost sales £2180.

"His best option appears to be to lease in extra quota, although the lease price only has to increase to 14p/litre for the benefit to disappear," says Mrs Binnington.

Farmer C, in contrast, gets his butterfat down 10 points to 3.86%. Although this means a drop in revenue to £118,550, he also gains an extra 9000 litres of "free" quota, courtesy of the butterfat regulation. This is worth an extra £2134 in milk sales.

Table 2 sets out the net positions for each farmer. The farmer with the lowest butterfat (Farmer C) also has the highest income – and probably the lowest costs.

"The figures are even better if your buyer pays a flat rate, as there is no income loss from driving down butterfat, yet there is a clear gain from selling more litres."

Mrs Binnington recognises that suppressing butterfats is no easy task, especially in winter when the cows are on silage and concentrate.

"But the early summer provides us with a window of opportunity," she says. "We used to buffer feed with maize and grass silage when we turned our cows out. But this year we decided to really challenge them and have used brewers grains instead."

The results have been impressive. In April, butterfat came to 3.85% (11 points below base) and dropped further still in May to 3.55%. Last year it was running at over 4% for April, May and June.

"In two months this has given us an extra 11,500 litres of quota in the bank, which we can produce at a later stage when the seasonal price is better. Alternatively, we may use it to cut our lease requirement," she says.

As an extra bonus, by increasing starch and reducing fibre in the quest for lower butterfat, milk protein has also increased. April and May saw the Thakeham herd achieve 3.30% and 3.34%, respectively, compared with 3.17% and 3.23% last year.

And the move to lower fat should also benefit milk buyer, Unigate, which is already talking about matching its contracts to local requirements. With the south east dominated by the liquid market, and with the consumer preference for low fat milk, Mrs Binnington feels she is doing her bit for the market too.


Table 1: Effect of different butterfats

Assumes each farmer has 500,000 litres of quota and a 3.96% butterfat

base. Each produces 500,000 litres of milk at 3.25% protein, but with

different levels of butterfat. They are paid 2.54p/litre for each 1% of fat

and 4.28p/litre for each 1% of protein.

Farmer A, (matches his quota and butterfat base)

1 litre at 3.96% fat = 10.06p

1 litre at 3.25% protein =13.91p

=======

Total sales = 23.97p x 500,000 litres = £119,850

Farmer B, (goes 10 points over his butterfat base)

1 litre at 4.06% fat = 10.31p

1 litre at 3.25% protein =13.91p

=======

Total sales = 24.22p x 500,000 litres = £121,100

(But the butterfat adjustment takes him 9000 litres over quota. He must

either pay superlevy, lease more quota or cut production.)

Farmer C (goes 10 points under his butterfat base)

1 litre at 3.86% fat = 9.80p

1 litre at 3.25% protein =13.91p

=======

Total sales = 23.71p x 500,000 litres = £118,550

(Farmer C is 10 points below butterfat base, which means he can produce another 9000 litres to reach quota. At 23.71p/litre, this is worth an extra £2134.)


Table 2: Net income position for each farmer

ButterfatLitres producedTotal sales

Farmer A3.96%500,000 £119,850

Farmer B 4.06% 500,000

&#8226 after super-levy at 30p/litre£118,400

&#8226 after lease costs of 12p/litre£120,020

&#8226 reduced sales of 491,000 litres£118,920

Farmer C3.86%500,000

+ 9000 £120,684