26 November 1999

Loss for year, despite lower production costs

THIS financial year is likely to result in average producers making a loss after Octobers fall in milk price.

But past financial performance of top herds shows that on a p/litre basis they produce more milk from less, so it appears their costs are lower, said ADASs John Allen.

"These farm have lower overheads, finance, rent and quota costs. However, they are spending more on building depreciation, something which can be stopped in bad times."

All producers should aim to produce more from less in the future, he said. "But do not ignore technical excellence, generating output with good business management and financial control."

Producers have invested in generations of genetics and that potential, about 2000 litres a cow more than the actual average achieved, is yet to be unleashed.

"If you realise half of that potential and pay for quota it could be worth £7500 on a 150-cow herd."

But there may be scope to profit from increasing herd size and restructuring businesses to improve profit, balance sheets and cashflow.

"However, do not mix up your personal and business lives and do things because you always have, such as keeping heifers because you like them. You must have a private life, but must sustain that with a profitable business."

There is some prospect of a slow recovery of the world milk market, but the downside is countries without quota are increasing production.

Mr Allen said that world milk production is increasing at a rate of 1.8% a year. &#42