19 August 1997

Dairy profits will drop

DAIRY producers face a significant downturn in profit as the lower milk price starts to bite.

According to Axient director Tom Kelly, dairy farms costed under its farm business accounts scheme, which have an average of 118 cows, are likely to see profit tumble by more than £26,400 to just £11,442 as a result of falling milk prices.

Speaking at this weeks European Dairy Farming Event, Mr Kelly said that although the loss in milk income would amount to £28,000, better cow performance would add just over £1500 to incomes.

"Profits on these costed farms are likely to fall from an average of £31,087 at the end of the last tax year to only £11,442 when the current tax year ends. Borrowings will increase from £7735 to £18,187.

"And as lower prices kick in now, we are only looking at the effect over six months, rather than a year," cautioned Mr Kelly.

He forecast that the current reduction in capital expenditure was likely to continue, and urged producers to consider further options to counter falling prices.

"Aim to increase milk production, and buy or lease quota to cover that. Minimise concentrate inputs by better use of forage and grass, and correct cell count or Bactoscan concerns – a relatively easy thing to improve. Cost cutting should also be considered, although there is not much scope."