1 October 1999

Marginal milk gap opens up to 1.1p a litre

By Simon Wragg

DESPITE a milk price fall of 2p a litre over the last year, dairy farmers can now produce marginal milk more profitably.

The ADAS Milk Cheque annual report released at last weeks European Dairy Farming Event, Stoneleigh, showed other costs had fallen to help offset the lower milk price. Notably, quota and bought-in feed costs had opened up the marginal milk gap – where output is increased without incurring extra overheads – to 1.1p a litre.

Report manager Ian Powell said the margin left after taking quota costs from milk prices had remained very similar for the last three years at 12p a litre. Given a 10% fall in purchased feed costs, profits on marginal milk could still be made. "At a time when milk incomes are under pressure thats worth quite a lot."

But price pressure was affecting all businesses. Even the top 10% of producers ranked by efficiency were feeling the squeeze with margin over all feed – which accounts for the cost of home-grown forage – down by £60 to average £1211 a cow.

There also remains a huge disparity between milk prices of up to 2.13p a litre between buyers and individual contracts worth £20,000 to an average herd, the report says. "Its vital producers select a milk buyer that will maximise their milk price," added Mr Powell.

The upward march of herd size and average yield continues, albeit at a slower pace. Top 10% of herds average 8430 litres a cow compared with 6670 litres a cow for mainstream units. The typical herd size is now 166 cows, up 7% on the year.

Spring calving is also becoming more popular, reducing the milk pool in summer months, it adds. "The dairy industry would be well advised to take heed of the changes," Mr Powell warned. &#42