Management Matters: Focus on profitability not price

Five years ago Peter Chapman would never have predicted that he would be receiving 25p/litre for his milk in 2009, and still be struggling financially. Along with other milk producers in the country, his input costs have rocketed over the five-year period (table below).

The farm’s performance recording system does not include a figure for cost of production, but he estimates that it currently stands at 29p/litre, including his own labour and the capital needed for reinvestment. In spring 2004, cost of production stood at 20p/litre.

“This comparison highlights the unreliability of specifying a p/litre figure that dairy farmers need in order to stay in business,” Mr Chapman says. “It would be more accurate to set a price based on cost of production, plus reinvestment.”

While producers have been advised to set aside their annual single farm payment, and run their businesses on the assumption that it is no longer available, this has not been possible at Thornton Grange, where, cow numbers have increased from 130 to 175 over the past six years.

“This advice is all very well, but ever since the scheme started, I have been forced to use my SFP for reinvestment,” he says. “The expansion plan is a vital element of the business, because of the need to spread fixed costs and run the farm more efficiently, with the aim of improving profitability in the long term.”

Improving performance


Current average milk yields are similar to 2004. However in 2007, production dipped sharply, down 800kg to 7400kg. Mr Chapman blames problems with the calving interval and a degree of overstocking.

 

Autumn 2009

Spring 2004

Average yield

8350kg

8200kg

Milk price

25.1ppl

17.1ppl

Milk value per cow

£2,077

£1,430

Feed cost/litre

7.5p

3.6p

Cost of production

29ppl

20ppl

 

Having peaked at 430 days, the calving interval has gone down to 400 days, following a conscious effort to improve heat detection and bulling cow management. Tail paint and kamars, at a cost of about £1 a unit are used across the herd at 42 days post-calving. All the cows are routinely checked for endometritis (whites) within three weeks of calving. Any suspect cases are washed out and treated with antibiotics.

Over-crowding has been significantly eased, by extending the main cubicle house and putting up new dry cow housing.

“At one point in 2007, we were down to one cubicle per cow, and there was a shortage of space at the feed barrier,” says Mr Chapman. “I knew that the situation was putting cows under increased pressure, but I probably underestimated how seriously it would affect production.”

Milk production figures (12-month rolling)

 

Margin over purchased feed

£1,482/cow

Feed cost/litre

7.5p

Feed kg/litre

0.31

Milk value/cow

£2,077

Rolling average milk price

25.1p/litre

Another part of the business plan involves selling surplus heifers and cows. Recent price hikes have made this seem an attractive prospect, although Mr Chapman is all too aware of the price volatility that seems to have become a permanent fixture in the agricultural market.

Having used sexed semen to speed up the herd expansion, he will have a glut of good quality females to sell over the coming years. He is hoping that the present demand will be sustained.

“The number of bulls offered with sexed semen is growing rapidly,” he says. “It costs around 50% more than conventional semen, but I think the extra expense is fully justified. Not only has the use of sexed semen helped to increase numbers, but it will also give me a wider selection of my own heifers to choose from.”

Among the selected sires are Netherside Dynamo, Cogent Master and Retinue Red. Mr Chapman usually chooses bulls with 400kg of milk or more, and with a minimum Profitable Lifetime Index of +80.

“I don’t stick to rigid criteria, because occasionally I will see a bull that I really like the look of. In that case, I’m not too concerned about the accompanying production data. I tend to look for bulls that are just above average in quality and price. I will usually spend about £20 a straw for conventional semen and £30 a straw for sexed semen.”

Mixed yields


The maize crop at Thornton Grange was harvested on 10 October, yielding an estimated 600t (fresh weight) from the 25 acres sown (24t/acre). This compares with 16t/acre last year. The entire process was carried out by contractors, leaving Mr Chapman and his cowman to concentrate on looking after the dairy herd.

Feed wheat yields of 3.1t/acre were more disappointing and below last year’s 3.3t/acre, largely due to poor weather at sowing, he says. This autumn’s sown crop is looking much more promising, having been planted in optimum conditions, using a plough and combination drill, he adds.

“I haven’t grown barley for many years, because it is not as profitable a crop as wheat. The only advantage is its early harvesting qualities, but as I don’t grow oilseed rape, it would not give me any rotational benefit.”

Thornton Farm

Thornton Grange Farm, Thornton Village, Middlesbrough, Cleveland, a 167ha (415-acre) rented dairy and arable unit run by Peter Chapman.

The majority of the land is ring-fenced and rented from one private landlord. The soil is a fairly heavy, deep clay

Around 97ha (240 acres) of grass are rotated with 70ha (175 acres) of wheat and maize. Oilseed rape is sometimes grown as a break crop

Thornton Grange supports 175 mainly commercial Holstein Friesians averaging 8,350 litres a cow. Calving is all year round and milk is sold to Arla. The business is on course to move up to 180-190 cows over the next few years

Peter and his wife, Jane manage the farm with help from one full-time worker and two part-time relief milkers

The farm has been in Countryside Stewardship since 2000, and entered into an ELS agreement in February 2006

 

 

 

 

 

 

 

 

 

 

More information on Thornton Grange Farm

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