Record milk solids boost prices

RECORD MILK solids this autumn are something of a mixed blessing for Ed Jagoe, owner/manager at Ballindeasig, our Management Matters farm on the south coast of Ireland.

With protein levels peaking at over 4% in October, he can be well-satisfied that his policy of precise milk recording and careful sire selection is paying off.

But butterfats, too, have climbed steadily since early May, topping 4.5% last month. That is well over last year and ahead of most other farms in the same Teagasc monitor group. “That will cost us dear in additional litres once the butterfat adjustment is made, pushing us even closer to our quota,” says Mr Jagoe.

Figures from milk buyer Dairygold show that, to the end of October, Ballindeasig had used around 341,500 litres of its 502,900 litres of available quota, leaving just 161,400 litres for the last five months of the milk year.

Wound down

Even though the farm’s production is wound down over the winter, with just 32 of the 79 cows still milking during December and January, the cows will be turned out again in early February, by which time things will be even tighter on the quota front.

There is still a chance eldest son Alan may get a top-up to the 21,593 litres awarded to him so far this season by Dairygold under the father/son partnership arrangement, though that is likely to be limited.

With super-levy alarm bells already ringing, one response has been to buy in more bull calves to drink some of the surplus milk.

But Mr Jagoe is not alone in this pursuit, with the result that calf prices have been holding firm. The half dozen Aberdeen Angus calves set him back about 235 (165) a head, while a similar number of Friesians cost 95 (67) each.

“Many farmers had predicted that calf and weanling prices would drop this autumn as they will not be needed to collect the 210 beef premium or the 80 slaughter premium next year. But this has not happened and prices are only back about 30 a head.”

The extra calves that have arrived have certainly benefited from the high fat and protein content of the milk, as has the latest milk cheque.

With actual butterfat of 4.51% and protein of 4.08% in October, Ballindeasig’s milk achieved a substantial premium over the Dairygold base price of 27.4c/litre (19.2p) for a 3.6% butterfat, 3.3% protein standard litre.

With no deductions for quality, but including VAT and after the various statutory levies for disease control, inspections and the Irish Dairy Board, the farm’s net milk price panned out at 33.6c/litre (23.52p). This was more than 2.6c/litre (1.8p) above the co-op average.

Year on year, the dairy enterprise has also been doing well. Cumulative butterfat for the ten months to October came to 4.01% compared with 3.9% last year, while protein averaged 3.63% compared with 3.55%. Yield, on the other hand, has dropped, partly due to lower concentrate use, with just 707kg/cow fed so far this year compared with 889kg/cow for the same period last year.

Combined with lower nitrogen use, the overall result has been to push up the margin over feed and fertiliser from 25.95c/litre (18.2p) to 26.5c/litre (18.6p). Milk from forage comes to 88%.

As for the future financial performance, further price gains are expected over the next few months as the winter premiums kick in. But, looking further forward, the picture is not so rosy.

Mr Jagoe recently attended the Teagasc national dairy conference in Cork where the chief executive of the Irish Dairy Board forecast that price cuts intended for this year under CAP reform could bite in 2005.

“There was some surprise that the market had not weakened already, given the cuts in export refunds the commission has imposed. But there is strong demand for dairy products from China and this is taking some of the surplus milk produced by New Zealand and Australia.”

Quota worries

Countering the downturn when it comes is all about expansion and Mr Jagoe is keeping a watchful eye on government consultations on the future availability of quota. “The main thing for us would be to see an end to ring fencing,” he says. “Quota is currently kept within the co-ops, so there is little scope to get hold of it from areas where milk production is more marginal.”

But he is against the idea of an open market in quota, which would be hugely destructive in terms of getting young people into dairying. “There is too little quota available and too many people who have not got what they needed in the past from restructuring who would drive prices sky high.”