5 April 2002

NImilk benchmarking pays off

BENCHMARKING of milk production costs in Northern Ireland appears to have highlighted the value of expanding herd size to improve profitability.

Charles Kilpatrick of Greenmount College, explains that 89 farms benchmarking their businesses for three consecutive years has encouraged them to expand and increase yield/cow. "This resulted in farm profit being maintained, even though milk prices had fallen."

He believes the economies of scale from spreading overheads over more litres has helped. "However, profit/cow tends to decrease, due to management inefficiency and lack of attention to individual cows when herd size is more than 150 cows."

But herd size itself was a poor indicator of likely profitability. "There are tremendous variations in profits at any given herd size and considerable scope for improvement in many larger herds." Benchmarked farms had herds of 20-350 cows.

"Better managed smaller herds can compete well with poorly managed larger herds." A group of 31 smaller herds with an average of 50 cows show a profit of £10,770 in 2000-2001, compared with 61 herds averaging 100 cows which only made a £4680 profit.

The smaller herds maximised the value of outputs with a milk price of 18.8p/litre, compared with 18.5p for larger herds and saved £100/cow on overheads – before family labour. Yields for the smaller herds were also 400 litres/cow higher at 6500 litres and milk from forage 800 litres/cow higher than for larger herds.

Smaller herds also kept replacement rates at an acceptable 24%, whereas larger herds replaced 29%, adds Mr Kilpatrick. &#42