FALLING PROFIT

26 September 1997

What to do

about falling price

PRODUCERS should aim to maximise milk price and production, minimise concentrate inputs, attempt to cut costs and avoid gimmicks to help counter the falling milk price.

That was the advice of Axient business director Tom Kelly, who revealed that the fall in milk price would see average profit for a 118-cow herd in their 135-farm sample fall from £31,087 in the 1996/97 tax year to only £11,442 at the end of this tax year.

"The full effect of the falling milk price is yet to be felt, but its a drastic change in scenario."

He advised producers to maximise milk price by ensuring they corrected any cell count and Bactoscan concerns. "To my amazement, producers are still suffering lower prices because of poor hygiene results. They are a relatively easy thing to correct, and the standards are not demanding.

"Each mastitis case on-farm costs £133 in antibiotics, withdrawn milk and lower production over the whole lactation – vet fees and risk of milk contamination add to that cost. Average annual mastitis incidence is 40 cases/100 cows."

Considering every-other-day collection could be another way to maximise milk price, said Mr Kelly. "The £13/day transport charge means it is worth considering whether to increase bulk tank size."

Increasing production by use of better genetics would help counter falling prices. "Producers should also make maximum use of forage – and particularly grazed grass. Concentrates are cheaper, but producers seeking economies should aim to get more from grazed grass, and should start planning grazing for 1998 now."

Cost cutting, although easy to talk about, was difficult in practice, warned Mr Kelly.

"There is little difference in overheads between the top and bottom quarter of herd, but producers should look at costs of owning machinery, contracting and sharing. Accountants fees should also be examined – we will do accounts for half the cost if producers are on the farm business accounts scheme."

He urged producers to avoid gimmicky solutions. "Dont think that moving to another milk buyer will make much difference – prices are becoming much closer. Designer milk is a passing fashion, and neither elite herds or blueprints will help."

The full effect of the falling milk price is yet to be felt, warned Tom Kelly, who said maximising milk production and price, reducing concentrates and avoiding gimmicks were key considerations.

COUNTERING PRICE DROP

&#8226 Improve milk hygiene.

&#8226 Every-other-day collection.

&#8226 Improving genetics.

&#8226 Maximise use of forage and grazed grass.

&#8226 Reduce overheads.

FALLING PROFIT

&#8226 Meet top standards.

&#8226 Produce more milk.

&#8226 Use grass more.

&#8226 Examine costs.

&#8226 Avoid gimmicks.