28 May 1999

Little dairy progress despite price drop

DAIRY producers have suffered a 2p/litre fall in milk price over the past 12 months, but have made little technical progress.

Speaking at the release of Andersons Dairy Manager results to March 1999, consultant Tony Evans said that despite a 10% price fall, hardly anything – either in technical progress or improving margins – had changed.

The results, comparing performance of 200 farms with an average of about 100 cows, show that herd margins have fallen by 9% compared with March last year, despite a 4% rise in herd size. While producers had benefited from feed prices falling by £21/t, they had made only 2% improvement in forage efficiency, and no change in milk quality.

"Winter performance was poor this year, mostly due to low quality silage. Producers only started adapting to using wet silage in December and January, which left a lot of catching up to do."

A perception that the UK was under quota had also affected financial performance, he said. "Going for production runs the risk of not making any money out of additional litres. Also the marginal response on poor quality silage gets worse. Some clients leased or sold quota rather than producing marginal litres." Mr Evans said he felt some producers had lost their main focus, providing a key lesson for this year. "It is a perverse lesson, but if you think you will get out of a bad financial situation with technical performance and it is a bad year you wont get anywhere.

"Overheads must be attacked if you want better performance. The dairy industry still has one of the strongest balance sheets in the industry, but I do not think the milk price will come back in our favour. Producers need to make performance change, consider labour use, enterprise performance and finance.