8 August 1997

Dairy strategy against falling price backdrop

Another sharp drop in milk prices this autumn looks like blowing the Lees further off course against their budget.

Philip Clarke reports

A NEW consultancy package from recently launched Axient Farm Business Solutions (formerly Genus) aims to lift profits at Dowrich, despite continued pressure on milk prices.

"In future there will be a two-man approach to our service," explains senior consultant Norman Ford. "I will deal with long-term strategic planning for the farm, while my colleague, Richard Foster, will deal with the day-to-day tactics."

This approach is becoming increasingly common for Axient clients. As well as offering a more efficient service, the aim is to raise profits and help the business achieve certain strategic objectives, set out in the annual budget statement.

For Dowrich, these include greater financial security, improvements to farm infrastructure and a higher standard of living for family members.

"The budget shows us where we want to be going," says Mr Ford. "During the year, certain things may happen to blow us off course. But so long as we do not lose sight of our long-term objectives, we can take corrective action to put us back on track."

For the current financial year, a number of assumptions were built into the budget, including a milk price of 23.5p/litre, a quota leasing value of 11p/litre, a cow concentrate cost of £142/t, a finished pig value of £83.50 a head and a maincrop potato price of £75/t.

Already these are starting to look wayward, especially with another possible 2p/litre drop in milk prices expected from October.

But while this is set to knock about £26,000 off the farms milk receipts, Anthony Lee also points to the "gains" against budget, which he hopes will bring some respectability to the bottom line.

For example, the cost of quota should be well into single figures later in the year, with 8p or 9p/litre more likely for the 100,000 litres he plans to lease in.

Cow concentrate costs are also looking better. "We can now pencil in £132/t instead of £142/t, which should claw back another £2600." An equivalent £10/t may also be saved on the pig feed bill, worth another £8500. But potatoes remain uncertain, with the first signs of blight appearing in some of the farms crops and no clear steer on where maincrop prices will go.

"In general, I believe the gains should cancel out the losses against budget, though there is still a long way to go before our financial year end in April," says Anthony.

Despite this, corrective action is already under way with the milking herd to mitigate the effects of lower milk prices.

Supplementary feed is now being given to both the high and low yielders to try to lift output and capitalise on Milk Marques summer premiums, (worth +3.5p/litre for July deliveries and +3p/litre for August).

Both herds are now brought in at 11am – three hours before afternoon milking – and given access to 20kg a head of grass silage, 10kg of potatoes and 0.5kg of soya bean meal. They also get sugar beet pulp as a parlour feed. "Previously, they only had access to potatoes and a block of silage when they came in at 2pm," says Anthony. "But, with grass getting short, they needed more, so we have upped the feed rate and the time they have to eat it."

The results have been positive. On July 10, the day before soya was added, average daily yield came to 17.5 litres a cow. By July 23, when the cows started coming in earlier, it had risen to 18.8 litres. This week, the cows were giving 19.5 litres on average, split 23.5 litres from 100 "high" yielders and 15 litres from the "low" yielders.

"With milk price likely to fall, we need to sell as much as possible now while the return is high and cut back later on the low income milk."

But as well as cashing in on the healthy milk price to concentrate ratio, Anthony has also been keen to keep the cows milking well. "Last year we did not start supplementary feeding early enough and they never really got going again. We tried all sorts of things to give them a boost – extra protein, extra energy. But it all had little effect, except on the feed bill."

So long as the cows keep going now, he has more flexibility to either cut back production or lease in more quota later in the season.

Controlling feed costs will also take on renewed importance this winter as margins come under yet more pressure.

Silage will play a key role as the Lees try to maintain an improving milk from forage ratio. Two cuts have now been taken, yielding about 900t. And while the first cut was "not the best silage in the world", as the cool wet May led to reduced sugars (see table), the second cut is expected to give a much better analysis.

Anthony has also pressed on with his straights buying. Maize gluten had already been booked for the winter at prices ranging from £95/t to £102/t, though he admits he could have done better by waiting longer. He has now taken on some rapeseed meal at £90.50/t.

But so far Anthony has held back from booking any soya, believing the strong £ and big US harvest will bring values down once new crop is available.

Improving milk hygiene is another key part of the battle against lower milk prices. Currently, 200 litres a day, from known high-cell count cows and fresh calvers, are being kept out of the bulk tank and fed to calves.

Anthony is also continuing to send offending animals to the OTMS scheme as culls, though the recent backlog at abattoirs has not helped.

"I had booked seven in for July in order to beat this weeks drop in the compensation rates," he says. "But then MAFF reduced the number of abattoirs available, so my marketing ploy went out the window. In the end, I only got two away in time and must now accept less money for the remainder."

But at least Dowrichs Bactoscans and cell counts are heading in the right direction, (see table). "We have our animals tested by NMR once a month. Even so, if there is a problem with an individual cow, by the time it shows up, it is too late for that months deliveries.

"Overall, however, the trend is down and we should be picking up more Milk Marque premiums as cell counts come under control."

Second cut silage produced a better quality sample than first cut.


Table 1: Dowrich milk hygiene

(000)BactoscanCell count

1996199719961997

April7956195208

May4937216207

June5330207276

July4821256180


Table 2: Dowrich silage analysis (first cut)

DM22.3%

D value61.3%

ME9.8 MJ

Crude protein145g/kg

pH3.9

Ammonia4.3%

Sugars7.7g/kg

Ash92g/kg

FARM FACTS

&#8226 A 235ha (580-acre) family farm in mid-Devon, run by Anthony Lee, his father Michael and his brothers, Roger and Christopher.

&#8226 Dairy herd of 252 Holstein Friesians averaging 5800 litres a year.

&#8226 Outdoor pigs reared from 220 sows.

&#8226 Potatoes grown on the farm and on rented land.

&#8226 Strong emphasis on co-operative marketing.