8 December 1995

Milk price rises are no longer the key to better margins

By Philip Clarke

FUTURE increases in dairy margins will have to come from improvements in technical efficiency and milk composition rather than price, warns ADAS dairy consultant Ian Powell.

Latest figures from farms costed by the ADAS Milk Cheque service demonstrate the dramatic impact of higher milk values since deregulation a year ago.

"Our costed herds continue to improve in terms of yield and margin, with average output up 300 litres on last year to 6112 litres a cow and with margin over purchased feed up £263 to £1269 a cow," says Mr Powell.

The key to this was the 16% increase in milk price for Milk Cheque members to an average 24.98p/litre for the 12-month rolling average and 26.35p/litre for October deliveries.

But, even assuming constant prices, the 5% yield increase more than offset the 3.6% feed cost increase (to £258 a cow), leading to a higher MOPF of £1064 a cow.

"In the next 12 months we are likely to see milk prices settle down," predicts Mr Powell.

"But our costed farms are still likely to see yields and milk prices increasing through an improvement in protein composition,"he says.

"We saw a significant rise in protein percentage in April to June (up 0.07% year on year) but the drought caused them to drop in July to September (by 0.04%). We are now seeing proteins starting to increase again."

The drought also caused a drop in butterfat levels. But yields were maintained throughout, due to a combination of genetic improvement and buffer feeding, so bucking the national trend.

ADAS milk cheque results for October

Monthly 12 months

results rolling results

Oct 95Oct 94Oct 95Oct 94

Daily yield/cow, litres21.2(19.8)–

Daily yield from forage/cow, litres6.5(6.6)–

Annual yield/cow, litres- -6112(5810)

Milk price/litre, pence26.35(22.81)24.98(21.63)

Concentrates cost/t, £136(138)137(139)

Concentrates use/cow, kg–1796(1725)

Concentrates use/litre, kg0.34(0.33)0.29(0.30)

Purchased feed costs/cow, £26.0(23.2)258(249)

Margin over purchased feed/cow, £116(90)1269(1006)

Margin over purchased feed/litre, p21.52(18.1)20.8(17.3)