12 July 2002

Management overcomes UKs dairy disadvantages

By Philip Clarke Europe editor

DAIRY producers in the UK may suffer from the lowest milk price in Europe, but actual profits are not far removed from average levels, according to latest figures from the European Dairy Farmers group.

Based on data from 153 participating farms in 12 European countries, the analysis shows the UK at the bottom of the price league at 17.6p/litre in 2001. That compares with 19-21p/litre for most other countries, topped by Italy at 21.2p/litre.

Exchange rate is one of the main reasons for this, said Alan Hopps, of Greenmount College, Northern Ireland, who has collated the information. Between Jan 1, 1999 and May 2000 the £:k exchange rate moved from 1:1.4 to 1:1.75, knocking more than 4p/litre off UK values.

British milk producers also suffered from lower cull cow and calf receipts, although with BSE now affecting the whole of Europe the discrepancy has narrowed.

But UK producers have learned to live with lower returns by containing costs and improving efficiency, Mr Hopps told group members at the Royal Show. Variable costs came to 10.7p/litre in the UK last year, compared with 13p/litre for the sample average. Total costs, including quota, were 18.8p/litre compared with a 22.3p/litre average.

British dairy farms also outperformed their Continental counterparts in terms of efficiency, said Mr Hopps. In terms of milk yield/unit of labour, the UK sample achieved 180 litres/man hour, compared with 150 litres/man hour on all the farms.

Replacement rates were also lower in the UK, with about 25% of the herd culled out each year, compared with, more than 30% in France, Holland, Sweden and Germany.

UK producers also enjoyed a relatively low capitalisation, with just £9000/cow invested in quota, livestock, machinery buildings and land, compared with almost £22,000/cow in Holland.

Borrowings were also below average in the UK, with liabilities of less than £1000/cow, compared with more than £2500/cow in Switzerland, Belgium, Sweden and Holland.

"The main lesson from our study is that successful dairying is not about location," says Mr Hopps. "In the top 25% of EDF farms we find producers from Ireland, Germany, Holland, Spain, Belgium and the UK. It just shows that natural disadvantages can be overcome by good management."

Irish producers do particularly well. Despite having the lowest yields in the sample at just 5500 litres/year, profit/cow is among the highest, due to the low cost, grass-based production system. Sweden, conversely, has the highest yield and lowest profit. &#42