19 September 1997

SCOPE TO BEAT LOW PRICES

Low milk prices, expected to be 20p/litre for most producers by October, will wipe thousands of £ off business profit this year. Of that there is little doubt. The question is how best to offset the lower income by improved efficiency.

Certainly not all is doom and gloom. On a positive note the strong £ ensures that imported raw materials for feeds and fertiliser are cheaper. Similarly, low cereal prices offer scope to economise whilst still providing a quality ration.

Plentiful supplies of generally good quality forage should also help to reduce winter feed costs – as will unseasonably good supplies of grass. It will make sense to capitalise on grazing this month while milk prices are still high.

Indeed, now is the time to accumulate grass ahead of the cows and prepare for an early turnout in spring. This Update details how best to manage grass during autumn and winter, and offers guidance on measuring grass, including how to use a rising plate meter. Knowing how much grass is on the farm will enable better use of this cheap feed, and help to extend the grazing season later into the autumn and earlier in spring. This in turn will reduce milk production costs.

With harder times ahead it will be important to keep a close eye on cost control. All business practices will need re-examining to ensure weak links in the chain are identified and tackled. Dairying experts suggest most producers could shave 2p/litre off production costs – either fixed or variable – without difficulty.

As this Update explains, areas to focus on include feeding management. Good milk prices of recent years and relatively competitive concentrate prices, coupled with tighter forage supplies, have led to higher input systems. With more fodder about this year, and a lower milk price, a rethink will be called for.

Other areas for scrutiny include breeding policy, grass management, fertiliser use, wages, quota leasing, machinery and milk quality.

But sustaining profits into the future will depend on growth as well as improved efficiency. Turnover will have to rise.

That will only be achieved successfully if each farm adopts the most profitable system of milk production based on lower returns a litre.