14 April 2000

Dont spend money if its not there to spend

KEEPING your chequebook closed when income is hard to find is an important message for many UK and Irish dairy farmers facing lower milk prices.

According to Kiwi dairy researcher John Penno, New Zealand producers stop spending money when it is not there – because they had to. "For the last five years, dairy farmers have had to adjust to milk price of IR10p/litre, so they have to be efficient."

Even within the constraints of quotas, he said producers must strive to meet quota for least cost. NZ farmers looked to increase total production to cut costs, but Mr Penno acknowledged that quota constraints made that more difficult in the UK and Ireland.

"The focus is off increasing total production efficiently and instead is on achieving quota at least cost. That means getting more production from each unit of land, each labour unit and each cow."

He said using fewer resources to meet milk quota would be the right way for UK and Irish dairy farmers. What resources were left unused, such as land, could be put to other means of earning income.

Producers should aim to raise profit by improving efficiency. "This means increasing production for each cow, each man and each hectare."

To do that, he reckoned producers must provide as big a feed supply as possible to lift milk output: Using grass would also help.

But he warned those using pasture based systems to consider the efficiency of the whole farm, and the proportion of grass used for producing milk. Increasing stocking rate will boost grass utilisation each year, but at the same time, reduce milk output a cow.

"You need to take both into account; milk output reaches a plateau as stocking rates increase." But increasing those beyond this will start to affect production, causing it to decline. But Mr Penno believed there would still be benefits for those with two cows/ha to increase stocking rates.

Keeping your chequebook closed now that money is hard to come by is important, says Kiwi John Penno.