Dairy costs are still too high

DAIRY FARMERS need to be profitable, with milk prices at 15p a litre, says the director of the Agricultural Research Institute of Northern Ireland.

Sinclair Mayne told delegates at last week’s Grassland Challenge conference at Bodmin, Cornwall, that milk prices were likely to drop after CAP Reform. “We need to be profitable at 15p a litre because that is the worst case scenario,” he said.

Although experts had advised producers against subsidising production with their single farm payment, this was unlikely to be viable, said Dr Mayne. A survey in 2003 showed the average cost of production in England and Wales was 18.3p a litre, with 60% of farms failing to cover costs. Of the herds surveyed, only those with more than 100 cows had a positive net margin. “Scale is critically important in terms of costs of production.”

Instead of striving for higher yields with high inputs, producers should consider slashing costs and aiming for average yields of 5000 litres, he said. More extensive, simpler production systems would also lower labour costs, said Dr Mayne.

And producers should select cows to suit their system, choosing breeds with high fertility and low vet requirements, he said. This could add almost £6500 to the bottom line for a 100-cow herd.

Those producers who do survive can, however, expect better milk prices in three to four years’ time. He reckoned southern hemisphere producers would concentrate exports on Asia and China, leaving the UK to exploit European markets. “I think there will be a more profitable future.”