8 June 2001

OVERHEAD COST

CONTROL VITAL

REDUCING overhead costs a litre should be the top priority of every dairy producer restructuring a business after losing stock to foot-and-mouth.

According to Cheshire-based consultant Paul Findley, producers regarding the watershed of the crisis as giving them an opportunity to expand should move forward with caution.

"Dont assume expansion means keeping more cows; the emphasis should be on producing more litres," says Mr Findley.

He believes that if producers rush back into production and pay high prices for replacement dairy cows on the back of short-term improvements in milk price they are setting their businesses on a collision course.

"The figures just dont stack up. The crunch may not come for a year or two, but those who panic to get back into milk production face an uncertain future.

"Predicting what will happen in a months time is not easy under present circumstances. There are too many unanswered questions."

He says many producers are wisely avoiding the temptation to restock at the earliest opportunity: While that may be in December for some farms, others are preferring to wait until next spring when the risks of mixing cows indoors will be passed and herds can be settled into new routines at grass.

But even those who defer restocking until early summer next year will still face the prospect of higher prices for herd replacements.

"Not only does it make sense in the long term to aim for reduced overheads by producing more milk from the same number of cows, but higher depreciation costs will make it essential for expensive milkers to justify their investment with higher yields."

Mr Findley says whole herd purchases of cows where yields are moderate, but prices are well above market value, prevailing at the beginning of the year, will not be not a good investment.

"Far better to take time in selecting good quality cows, be determined to improve all aspects of herd management and produce as much milk as economically as possible. The aim should be to have the lowest possible depreciation value/litre produced.

"Fewer cows means less labour and less capital involved. We have to get back to producing as much milk as we can from every cow in the herd."

The problem faced by many producers trying to order stock after F&M is the reluctance of some with stock to sell to settle on a price.

"I have clients who have ordered stock, but all they can get is a commitment to supply and not a commitment on price. Some have already booked calving heifers for October-November delivery, but no one is yet sure when infected units will be given the all-clear to restock."

Mr Findley admits that planning ahead is not easy in the aftermath of F&M. "But those at the start of the year who were looking ahead to herd expansion and have since had their herds slaughtered should perhaps aim to replace a 100-cow herd with 70 cows without losing any production. &#42

F&M RESTOCKING

&#8226 Consider buying fewer cows.

&#8226 Increase yield/cow.

&#8226 Select good quality stock.