28 February 1997

MAFF CULL:CO-OPERATE…

UNCERTAINTY continues to plague the dairy industry this year – mainly due to MAFFs selective cull, milk price and quota.

On a positive note if super-levy is triggered, at least it will not be as painful as last year, as the recent green £ revaluations have reduced the penalty from 31.4p/litre to 28.18p/litre.

But that is small comfort to producers whose businesses will be affected by the selective cull of BSE cohorts. Producers can only guess at the scale of the loss – and at how fairly they will be compensated. As this Dairy Update suggests, it will pay to co-operate fully with the ministry vets, however difficult that may be.

And as if the prospect of MAFF condemning large numbers of cows isnt bad enough, green £ revaluations have impacted directly on producer prices, with values falling by as much as 3p/litre. Reform of EU milk policy and the quota system could reduce that price further still.

Each 1p/litre fall in the milk price will wipe £6000 off bottom line profit for a dairy farm producing 600,000 litres when its profit is 4-5p/litre.

But there is time to reduce production costs to enable profits to be maintained in the future.

All investments must be justified carefully, especially those that involve quota and long-term paybacks such as those for buildings and parlours.

Front line production costs such as feed and variable costs must also be justified in the same way. It could well pay to spend more time pondering over the office calculator and computer to pinpoint exactly where future profit lies.