SPECIALIST DAIRY farmers have cut their production costs, but two in five farmers still lost money according to the HSBC/ADAS Spotlight survey covering the 12 months to June 2004.

Producers‘ cost per litre fell by an average 0.5p/litre, but borrowing has increased and many farmers sold assets to pay for new quota in order to maximise single farm payment income.

The gap between the best and worst producers in efficiency terms has widened, so that the top 25% made a surplus of 3.1p/litre, while the bottom 25% lost 2.4p/litre.

Less than half of the 97 farms surveyed made enough cash to cover the cost of borrowing and reinvestment, pushing average losses to £7,900 or 0.7p/litre.

Across the whole survey group, average herd sizes were up two animals, while milk production increased by 54,000 litres, suggesting that further investment is seen as the key to the future.

Martin Wilkinson, head of business management for ADAS Consultancy, said: “Those wishing to remain in dairying need to drive inefficiency out of their business, which they can only achieve by understanding the current position and putting a strategy in place to address costs and invest in the business.”

Steve Ellwood, agriculture chief at HSBC Bank, said: “We shall also be sharing the data with manufacturers, processors, food retailers and food service companies so that they are fully aware of the pressure at farm level.

“We are planning a series of farmer meetings throughout England and Wales to discuss the findings further.”

Cost benchmarks 2004/05 (p/litre)

 Variable costs

7.5

 Direct costs (inc. drawings)

8.5

 Rent, finance and quota

2.5

 Total

18.5