3 March 2000

LOWCOSTSONLYANSWER

Is low cost production the only solution for milk producers who want to survive?

With rumours of the milk price falling again in April, its a question that is once again being thrashed around the industry. The answer must be yes.

Whether its cars, coconuts or milk, for any business to have a long term future, unit cost of production must be far enough below sale price to make a profit.

The tough questions are how low do costs have to be and what is a low cost production system? To these questions there is no single answer.

But as spring approaches, a financial year ends and a new quota year begins, perhaps its time for a fresh look at your farms production costs. Then decide what you need to make a living and work out how to close the gap between the two.

A higher milk price would relieve the pressure, but it could be some time before we see a milk price at the current average cost of production: Especially if the Dairy Crest and Unigate merger goes ahead.

Those that have addressed this problem are starting to feel confident for the future. One family featured in this Update has addressed the scale of its operation in order to continue making the profit it needs. But these changes dont happen overnight; it took them three years.

Producers in this Update choosing extended grazing and spring calving to cut costs are also finding these changes take time, with many lessons to learn. But the benefits are worthwhile. Two Irish producers who set up a low cost system some years ago tell us of their plans for future growth.