21 March 1997

Cuts come fast and deep – but dont panic

From Apr 1, most milk producers will be paid 10% less for their milk. FWs livestock team examines how to counter the lower price

MILK price has dropped faster and further than expected and many tough decisions on cutting production costs must be made.

But ADAS dairy consultant manager Mark Roach cautions against panic decisions. "Changes must be evaluated carefully," he says. A 2.5p/litre price drop, which Milk Marque members will suffer from April, cuts income by £15,000 a year on a 600,000-litre business, says Mr Roach. And the milk price is unlikely to recover to previous levels, he warns.

"The challenge is to see how much can be taken out of costs. Go through the business and see if it is as competitive as it can be, and find the weak areas to work on. Look at strengths, weaknesses and any opportunities.

"There is scope on nearly all farms to take 1p/litre out of costs, and over 2p/litre on some. But reducing costs may involve restructuring the business." Take a look at feed costs, and those for vet and medicine, semen, labour and machinery. And assess if you can make better use of forage and feed or can buy cheaper feeds, he says.

Cereal prices are also falling, so feed prices may drop and Mr Roach also predicts that quota leasing prices should fall by 2p/litre.

For the smaller producer, hardest hit by the price cuts, the best option may be to get out of milk production while quota and land values are good, he says.

ADASs Mark Roach:"There is scope on nearly all farms to take 1p/litre out of costs."


COUNTERING FALL


&#8226 Improve milk from grass and forage.

&#8226 Ensure milk in top hygiene bands.

&#8226 May be scope to buy cheaper feeds.