Chase efficiencies, not yields, for dairy profit

Dairy farmers need to be cautious when increasing cow yields to avoid adding hidden costs, as more turbulent times lie ahead.

Philip Clarke, from P and L Agriconsulting, is concerned by farmers chasing additional yield a cow without costing it thoroughly.

“In the past three to four years we have seen an upward trend in milk price and as a result a significant number of farmers have chased higher yields,” he says.

For some this has been profitable, where the extra litres come from efficient forage use and extra concentrates, without changing or complicating the system, he says.

However, for others it hasn’t been a wise move as they have complicated their system by adding considerable costs over and above purchased feeds.

“Since the climb in milk price, I have seen a lot of farmers move to keep their cows in year-round, adding costs and complicating their system significantly. Extra costs such as labour, power and machinery and contracting have been overlooked when assessing the financial benefit of increasing yields.”

He says some farmers are being “sold a dream” by feed salesmen and often don’t take into account the hidden costs behind feeding to achieve the extra litres a cow.

Volatile markets

“The marketplace does show we are in for a potentially difficult time over the next six to 12 months regarding milk price.”

With the weakening global market, Mr Clarke says farmers need to prepare for further cuts in case the global situation had a knock-on effect on UK milk prices.

“If that is the case then all farmers need to analyse their business to ensure that the pursuit of additional litres is profitable.”

As a benchmark for herds producing 9,000-10,000 litres a cow, no more than 10p/litre should be spent on total purchased feed, with a target of 8.5p/litre, he advises.

“If the milk price does fall and farmers fail to evaluate the profitability of their current system, they may well find that it becomes financially unsustainable. Evaluate every litre you are producing and challenge cows to produce these litres efficiently.

“You may find that reducing yield a cow and simplifying your system generates more profit,” he adds. “There’s no correlation between yield a cow and profit, but there’s a strong correlation between feed efficiency and profit.”

Andersons’ Midlands partner Mike Houghton says a “less milk” approach often made more money as a lower output can carry fewer fixed costs.

“I’d advise farmers to push up yields only if they’re very confident they will get the extra yield at the right proportion of cost,” he says.

Diseconomies of scale

Mr Houghton believes higher yields can sometimes bring diseconomies of scale as rising variable and fixed costs have to be factored in.

However, he says it is important to assess each farm on its own merit. While some may be able to increase yields profitably, many are unable to do this efficiently and could actually reduce profit a cow.

“Forage quality and current technical performance are the key points to assess. Just because wheat is £100/t, don’t throw it at the cow,” says Mr Houghton.

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