Take action against the milk price rollercoaster

10 May 2002

Take action against the milk price rollercoaster

Joining a discussion group and co-operating

with other producers can be the perfect tonic for your

business, as Richard Allison finds out from a

consultant and a producer group member

DAIRY producer members of the Poachers discussion group have succeeded in expanding herd size and increasing profits at a time when milk prices are falling.

Producers are pulling their hair out with the recent fall in milk price, says Ian Browne of the Farm Consultancy Group. "Just as it seemed that milk prices had recovered, they fell again."

In future, these fluctuations could be the norm. He believes increased co-operation between producers is crucial for surviving periods of low milk price. "If you have a room full of producers, there will be some achieving better results than others which the rest can learn from."

Using this approach, nine like-minded members of the Poachers group took advantage of the MDC £1000 for 1000 cows initiative. The aim was to help members, mostly farming in Staffs, achieve a milk production cost of about 11p/litre, says Mr Browne.

This is made possible by using the Comparative Farm Profit (CFP) tool. "It allows producers to share and openly discuss business information without loss of privacy, by excluding rent, quota and finance charges.

"The group has slashed production costs since adopting this approach, with the average falling from 18.2p/litre to 14.5p/litre, at the same time as milk prices fell by 3.9p/litre. One member reduced CFP costs by more than 7p/litre and there is still scope for further reductions."

In fact, this reduction in costs occurred faster than milk price fell, which meant profits increased. In addition, many group members expanded their business, with the average herd size increasing by 100 cows over the last four years.

Mr Browne believes their success is down to peer group pressure with positive and open criticism. "This provides the impetus for change for the group to move forward."

Discussion group leader Steve Brandon, who farms 210ha (518 acres) near Stafford, has seen CFP costs fall by 40%. "This has been achieved by shaving a bit off each cost. Its amazing how it all adds up."

Switching to a spring block calving pattern, instead of all-year-round calving, was one cost saving, says Mr Brandon. Milk production now matches grass growth more closely.

This increased reliance on grazing means grass silage requirements have fallen to 5-6t/cow, half the original requirement. "This halves contractor costs for making silage and cuts the cost of feeding silage out."

The shorter winter housing period also means less straw has to be stored, releasing building space. This proved crucial when the herd was expanded by 80 cows to 250 because capital did not need to be invested in new buildings.

The secret is to keep the system simple, concentrates are fed through basic parlour feeders and silage is self-fed. Now the unit is selling 50% more milk than several years ago with no extra staff.

Even the new parlour was kept simple, with daily milk recording no longer carried out. "We no longer chase yields with cows yielding 6500 litres, 1500 litres less than three years ago."

The group meets every six weeks, with each meeting dedicated to a single topic, says Mr Browne. "The last meeting focused on fertility at one members unit and a strategy was formulated.

"Members started pre-mating recording by applying tail paint 28 days before the start of the breeding period. Any animals not observed by 10 days before breeding was seen by the vet."

The aim was to achieve a submission rate of more than 90% in the first 21 days after the start of service, to achieve 60-70% of cows calving in the first 20 days of calving, says Mr Browne.

At another meeting, vet costs were examined. "It was evident that some costs were too high. By adopting a spring block calving pattern, vet costs for fertility were compressed into a shorter breeding cycle. Average vet costs for the group are now 27% lower at £26.60/cow."

However, cost cutting can go too far, warns Mr Brandon. "I have stopped chasing labour costs down and extra labour will be employed so that I have time away from day-to-day tasks. Time is needed to manage the business."

The group has, however, altered its focus from margin/litre to profit/litre. Mr Browne believes margins dont mean anything. "A business can have good margin over feed costs, but still make a loss due to high fixed costs."

Many advisers believe producing more litres spreads fixed costs, but it can hide problems, such as high vet costs, poor fertility or high replacement costs.

Looking to the future, Mr Brandon believes it is possible to make further reductions in production costs. One strategy being adopted is using Holsteins x Jersey crossbred cattle, but this is a long-term initiative with the full benefits not expected to be achieved until 2007.

"Using crossbred animals will hopefully reduce vet costs and replacements rates as a result of improved herd fertility and health status." &#42

The increased reliance on grazing means silage requirements have fallen, cutting contractor costs by half, says Steve Brandon.

&#8226 Share information.

&#8226 Adopt block calving.

&#8226 Long way to go.

Costs* 18.2 16.1 15.2 14.5

Income* 24.8 22.4 20.7 19.7

CFP* 6.6 6.3 5.5 5.2

* Figures do not include rent, finance or quota leasing.