5 July 2002

CONTRACT AGREEMENT KEEPS RAC MILKING

Contract dairy herd management has allowed the Royal Agricultural College (RAC),

Cirencester, to remain in dairy farming without the need for significant investment.

Jonathan Long went to see how its working out

CLOSING down an outdated unit and moving cows to a larger farm under a contract farming agreement should improve profit by 5p/litre on one Gloucester-shire unit.

RAC Farms director David Hardy says the contract agreement started in April 2000. It involves the college providing cows, day to day management, labour, machinery and half of the quota, while the other partner, the family trust of Noel Gibbs, provides land, buildings, dairy plant and the other half of the quota.

"It is important when entering into these types of agreements that risks are spread as evenly as possible between the two parties involved. This way everybody has as much to gain or lose from the units performance," says Mr Hardy.

Overall management of the unit is undertaken by Mr Gibbs, with day-to-day running of cows, land and buildings by RAC Farms. The move to contract managing the dairy herd was initiated by the fact that the original college dairy unit was becoming outdated and needed substantial investment to remain a viable operation.

There was little scope for expanding the herd at the original site, and with margins being cut, RAC felt that a herd of 155 cows would eventually cease to be profitable, especially on the farms light Cotswold soils.

"Opportunities to revitalise the original unit were limited and accommodating a larger herd there would have meant substantial remodelling, involving investing nearly £250,000. Our investment in the new unit, including cows, parlour improvements, building renovation and working capital loans to the new business, came to about £150,000," says Mr Hardy.

While milk price has fallen below the original budgeted figure of 17.5p/litre to nearer 16p/litre, Mr Hardy is confident that the unit can remain competitive. "We originally forecast a profit margin, after all costs, of 3.04p litre at an average yield of 7500 litres a cow. While this is not being achieved at present, we are doing better than the 2p/litre loss before entering this agreement. With increasing yields we believe we can get close to 3p/litre in the near future."

The colleges buildings and parlour, constructed in 1976, were not suitable for keeping more cows. "But the unit simply could not remain efficient with only 155 cows and had to expand. Now, with the contract unit, we have bought two extra herds and have reached our optimum of 300 cows."

These types of agreements allow producers expansion opportunities without huge financial commitments, for many people the cash simply is not there to expand, particularly if it involves investment in land and buildings. But when producers co-operate and share their skills then this type of arrangement can work well, believes Mr Hardy.

The nature of the agreement means that the enterprise is entirely self-sufficient of both RAC Farms and Mr Gibbs other farming interests. This can mean management difficulties, as the Elkstone dairy unit hires cows from RAC farms, but calves born are not RACs property, so it has to buy heifer calves from the dairy before sending them to a third party to be contract reared.

The new unit at Elkstone, eight miles from the college, includes housing for 300 cows, a 20:20 herringbone parlour, 137ha (338 acres) of grass and arable land, silage clamps and dry feed storage. "We view this as a purely milk producing centre, we do not rear any youngstock here and all calves are off the unit by three weeks of age.

"When the new unit was stocked cows arrived in two blocks, 130 bought in cows entered the unit in April 2000 with 155 cows from the original herd moving that August. It has taken nearly two years for cows to settle to a new routine, but now we have reached 7750 litres a cow and should be up to more than 8000 litres a cow by next spring," reports Mr Hardy.

The unit relies heavily on grazed grass as its main forage source. But being at 300m (900ft) grass growth cannot always be relied on. To combat this the highest yielding cows are kept in through the summer and fed a total mixed ration including grass silage, maize and whole crop wheat, together with caustic wheat and soya.

"We calve in two blocks of 150, spring and autumn. While many producers may find the idea of keeping spring calving cows in for the summer strange, we like to retain complete control of cows diets for at least three months after calving. This means we treat our high yielding spring calvers in the same way we treat our autumn calvers."

The herd is slowly becoming less reliant on maize silage as quality cannot be guaranteed. Growing maize on stony soils at 300m (900ft) is not ideal and starch content cannot be relied on. Maize yields have been good, but with low starch content it has to be supplemented with other feeds. "This year we will make Alkalage, which should give us a higher starch content and reduce reliance on bought in feeds," says Mr Hardy.

Cows are milked three times a day, with the third milking being done by outside staff. This gives the full-time staff more time to attend to cow management, leading to better cow health and higher yields, says Mr Hardy. &#42

Although milk price has fallen, RAC farms director David Hardy is confident the dairy unit will remain competitive.

&#8226 50:50 share of risks.

&#8226 Reduced investment.

&#8226 Independent enterprise.