Dairy industry tied down by high quota costs, says Genus

10 January 1997

Dairy industry tied down by high quota costs, says Genus

HIGH quota costs since milk market deregulation have acted as a strait-jacket on the industry, according to consultants, Genus.

Analysis of its clients costings for November highlight the slowdown in herd expansion in the two years since vesting day.

Product manager Mark Woodall explains that, from Nov 1992 to Nov 1994, the average Milkminder herd produced an extra 43,000 litres. But between Nov 1994 and Nov 1996 this rate of growth slowed to 27,000 litres a herd.

In terms of cow numbers, the average herd increased from 109 to 116 in the two years preceding deregulation. Since then, herd size has dropped back to 114.

"These trends lead to the conclusion that the rate of expansion has slowed," says Mr Woodall. "I am positive we would have seen a comparable rate of growth if quota had remained at pre-deregulation prices. Although deregulation was designed to create a more market-led environment, it has had the effect of holding back those wishing to expand.

"Farmers and their consultants clearly did their sums and saw no profit to be made from leasing quota at high prices and feeding concentrates to raise production." But yields have continued to rise – in particular, yield from forage. At vesting day this stood at 2127 litres a cow, but has now risen to 2560 litres a cow. Overall yield has increased by 210 litres to 6339 litres a cow in the past 12 months (on a rolling annual basis), while concentrate use has been static at 1664kg a cow.

As such, margins for the 12-months to the end of November stood at 21.1p/litre or £1338 a cow, still ahead of last year.

The total herd margin of £152,532 was £27,000 higher than at vesting day, reflecting higher milk prices and better efficiency.

lCostings from ADAS Milk Cheque herds show that, while monthly margin over purchased feed for November was down on year-ago levels, the 12-month rolling figure still registered an improvement at 21.1p/litre. Since deregulation in Nov 1994 there has been a marked lift in technical performance, with milk yield up 5.6% to 6341 litres a cow and milk from forage up 255 litres to 2774 litres.

"ADAS monitored herds have produced an extra £89 a cow margin over purchased feed, worth over £10,000 to the average Milk Cheque dairy farm," says the companys Ian Powell. &#42

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