True cost of family labour

THE CASE for a desperately needed increase in milk prices has been bolstered by incisive new family labour costings from the Royal Association of British Dairy Farmers.

The figures in the recently released report, Identifying the True Costs of Farmers’ Own Labour, detail for the first time just how much the industry, and even milk producers themselves, underestimate the cost of family labour on dairy farms.

The study, which surveyed 500 businesses, showed the cost of family labour on well-run, average-sized dairy farms was 42,241, the equivalent of 271 a cow or 3.81p/litre.

On a 150 to 200-cow unit, this pushed up the total labour cost to 5.5p-6p/litre, significantly higher than figures used previously, says RABDF chief executive Nick Everington.

Most herds in the survey were family-run involving an average of 3.62 people, with the farmer spending 57 hours a week on the dairy business and 64% of spouses and 42% of sons or daughters also involved, said the RABDF.

Chairman Tim Brigstocke said it was important that farmers used the figures to understand how much it was really costing them to produce milk. “Our survey at the Dairy Event, which attracts the best farmers, showed that 60% did not know their costs of production.”

But Mr Brigstocke said it was even more vital that the rest of the supply chain, including retailers and government, took note. “We were genuinely amazed when we talked further up the chain how little they understood. There is the impression of a sustainable and profitable industry that is just not there.”

Mr Everington said the results put farmers’ representatives in a much stronger position to lobby for price rises. “Now we are talking big bucks. There is no point saying we want 2p-3p/litre extra unless there are data to back it up.” He said the organisation would hold meetings with retailers to discuss the findings.

Tom Hind, chief NFU dairy adviser, said the report showed just how many farms were losing money. “The Colman Report said in 2004 that the average cost of production was 18.33p/litre before family labour. Since then we estimate that average costs have risen by 1.6p/litre. If farmers really costed in their labour they would be coming up with far in excess of 20p/litre.”

Nick Holt-Martyn of The Dairy Group said: “If processors and retailers accept the figures as accurate, which I hope they will, it adds to the debate as to why prices should increase. The margin is at the wrong end of the dairy chain.”