8 December 2000

THEYSTUCKTOTHEIRGUNS& UPPEDPROFIT

With all the doom and gloom in the industry at the

moment, could you be underestimating your success?

Marianne Curtis visited one Notts dairy enterprise that was

FACING falling dairy profits, managers of one corporate dairy unit seriously questioned the continuing viability of the enterprise this July. But consultants persuaded them that sticking with dairying could net an extra £36,000 a year profit.

Severn Trent Water owns the 1000ha (2500 acre) St Bardolph Estate, St Bardolph, near Nottingham for the purpose of sewage sludge recycling. As well as arable land the estate supports 365 dairy cows and followers and grows 180ha (450 acres) of maize.

Estate manager Chris Holt explains the crossroads the estate found itself at in July. "We always conduct an annual review of the business and this year did question the viability of remaining in dairying. One option we considered was having fewer cows and less staff."

As well as reducing labour costs, cutting dairy cow numbers to 180 would also have released 50ha (125 acres) of grass and maize land for growing wheat. At this point, John Allen and Paul Macer of the new Kite dairy consultancy became involved.

"High quality data going back many years meant we had a good basis on which to make decisions about the future of the business," says Mr Allen.

Not only was the data comprehensive, but it also showed that the dairy business was in good shape, he adds. "Margin/litre was 3.1p excluding rent, and variable costs were low, also most quota had been bought and paid for. This unit falls into the top 10% of dairy units on profitability which shows that even good dairy producers can write themselves off."

Instead of decreasing cow numbers, boosting yield by increasing diet specification was seen as the best way to take advantage of the upturn in milk price, says Mr Allen. "The cost of making large changes such as decreasing cow numbers is often underestimated.

"For example we pointed out that a cow which sells for £400 now may cost £800 to replace, supposing that the herd wanted to expand again in two years time."

Because the farm already has a low cost structure (see table), increasing output is the most significant way to improve profits, believes Mr Allen. "Increasing milk yield by 10% could potentially increase profit by £36,000 a year."

Previously, cows were fed three different rations, according to lactation stage, with cows in early lactation receiving an 11ME diet. Now they are flat fed a maize based TMR containing 12ME and 18% crude protein until 225 days after calving, according to herd manager John Jackson.

"Every time we used to switch cows between groups yield would drop, partly because of the stress of mixing them but also because they had to adapt to a diet change."

Although energy level has been increased, diet cost is now lower because home-grown ground wheat is used in the concentrate portion. Cost of the concentrate mix – which also contains rape, soya, molasses and minerals – is £101/t.

"Yield is currently 7200 litres and we are aiming to push it up to 8000 litres/cow in the next year," says Mr Macer.

Cows in the late lactation group are also receiving a higher spec ration than previously. Protein content has been boosted from 14% to 17% to maintain yield. But part of the yield increase will come as a result of the age structure of the herd, according to Mr Jackson.

"Of our 365 cows 112 are in their first lactation, so we should see a natural yield increase when they enter their second." Yield has increased by 200 litres/cow since July and profit/litre is now 4.08p excluding rent. Increasing cow numbers isnt an option as the unit is already running at capacity.

With a low cost structure Severn Trent Waters herd managed by John Jackson (right) is ideally placed to increase output, according to Kite consultant Paul Macer (left). This could lift profits by £36,000 a year.

INCREASING OUTPUT

&#8226 Sound cost structure.

&#8226 Good nutrition.

&#8226 Excellent record keeping.

Severn Trent dairy herd costings


Income (p/litre) Expenditure (p/litre)

Milk 17.8p Replacement 2.7

Calf 0.7 Feed 2.2

Culls 1 Forage 2.3

Straw 1.3

Muck removal 0.7

Vet/med 0.9

Utilities 0.5

Labour 3.5

Machinery 0.7

Sundries 0.64

Total 19.5 Total 15.4

Profit/litre (excl rent) 4.08