IS SEASONALITY CASH ENOUGH FOR SUMMER?
ARE seasonality payments for summer milk enough to cover the extra cost of producing milk in those months? Thats a question British Grassland Society management consultant Paul Bird has frequently asked his UK discussion groups.
He admits he does not know the answer himself, though his gut feeling is that the bonuses are not big enough. This is based on his knowledge that grazed grass is by far the cheapest feed for cows, and cows calved in summer are likely to spend longer on more expensive silage than spring calvers. Relative costs and availability of grazed grass and silage are, therefore, key factors in this debate.
This is illustrated in an example given by ADAS dairy business consultant Richard Eaton. Using a computer model he compared three 90-cow herds, averaging 7000 litres of milk sold at 20p a litre base price, and subject to the Milk Marque seasonality scale (see box). One herd calved in spring, the other two in summer but at different dates (see table 3).
His exercise shows the summer calving herd A averaging 0.89p/litre more for the milk over the year, and giving 0.4p/litre higher margin over cost of all feed than the spring calving herd.
"This example shows it pays to calve in May/June/July. The higher milk price more than compensates for the extra silage and cake needed by freshly calved cows on poorer quality summer grass.
"Summer herd B calving in June/July/August when there is less grass available, needs more supplementary feed, which the higher milk price does not compensate for. And so in this simplistic model this herd shows the same margin over all feeds as the spring calving herd."
But it must be noted that Mr Eatons cost of grass and silage (see table 3) is much higher than those suggested by Mr Bird who talks of grazed grass costing as little as £15/t DM and Axient (formerly Genus) figures of £10-20/t DM. The ADAS values are higher because they include an opportunity cost, such as the local grass keep price or a rent for arable use.
"For some time ADAS has been monitoring the costs, including opportunity costs, of all home-grown feeds including grazing and silage," says Mr Eaton. "Wide variations in cost a tonne of grass dry matter have been found, mainly because of differences between farms in dry matter yield and utilisation." Silage costs have ranged from £50 to £120/t DM, he says.
"Clearly the answer to the seasonality question will vary according to each farms conditions and only a thorough analysis for each farm using its own forage costs and milk contract will produce a valid answer."
Richard Eaton… this example shows May, June or July calving will pay.
Table 3: ADAS comparison of profitability of different calving dates
HerdSpring Summer Summer herdherd Aherd B
Milk value (£/cow)135414171397
Av milk price (p/l)19.3320.2219.96
Silage cost (£/t DM)80*80*80*
Grazed grass cost (£/t DM)44*44*44*
Concs fed (kg)164019201990
Margin over purchased feed (£/cow) 112411481119
Margin over all feed (£/cow)842868841
Margin over all feed (p/l)12.012.412.0
Assuming utilised grazed grass DM is 4t an acre, annual cost a tonne dry matter is £43.60. Grass silage is costed at £80/t of dry matter.