‘Dairy farms must look at profits before growth’

Dairy farmers and industry figures started 2014 full of optimism, with booming December milk production and buoyant prices.

But delegates at the Semex dairy conference in Glasgow were urged to become as profitable as possible before chasing growth.

Dairy analyst Ian Potter said global demand for dairy products would likely continue to increase, with China needing 10% more dairy products annually, largely from overseas.

But farmers should not be overconfident despite good grass growth, strong milk prices and falling feed and oil prices in late 2013, as a price correction was possible in the spring, he said.

“This winter is shaping up to be a good one,” Mr Potter said. “But you have got to look 100 yards down the road to see what is coming, not looking at the dashboard to see what speed you’re going.”

He said investment in processing capacity and efforts by farmers to grow profit margins were needed ahead of quotas being lifted in 2015.

“From where I am standing today this is the closest to the thriving, exciting, right conditions for farmers who are technically efficient to go forward with confidence,” Mr Potter said.

Rob Hitch, partner at north-west accountants Dodd & Co, said farms sizes would continue to grow, with more farmers collaborating on bigger units and the best staff given equity stakes to stay involved.

He said the most profitable farms, either on grazing or housed systems, would likely be the ones investing and growing.

“What we’ve seen is that during the past four years generally the businesses in the top 25% of performance have been above the average size,” Mr Hitch said.

“I think we’ll see a lot of people doubling up and getting to 1,000 cows – that is certainly happening. There will be winners and losers. The best operators are going to do very well.”

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