Producers urged to look long and hard at costs
Producers urged to look long and hard at costs
LEASING and concentrate costs have fallen sufficiently to offset recent falls in milk price, but producers must look long and hard at costs if theyre to survive.
Tom Kelly, Axient managing director, told the Spot-light on Profit seminar on staying profitable in milk that producers had few alternative forms of income if they opted out of milk. Now, a fall in leasing and concentrate costs had sheltered many from the milk price slump (see table).
"The exodus from milk isnt as bad as first thought. To survive, producers will have to look at increasing production, but some costs will need close scrutiny – something many dont like doing," he warned.
"You cant do much about rent or interest charges, and in my view few farms are over staffed. But sundry and power costs – particularly machinery – need looking at."
The true cost of making silage, including machinery, maintenance and labour costs needs to be isolated. Compared with concentrate at £115/t, silage could be expensive to make, he said.
"Nobody is keener on grass than me, but concentrate is a cheap feed at this price."
TMR users must also question their costs, he warned. "Look at these hallowed processes youve got into. Machines cost money, then theres the loader tractor to fill it, labour, and cost – including interest – of bunkers full of feed.
"Produce good financial management accounts. Its no good looking at accounts manipulated to show least profit for tax purposes. Only true and accurate management accounts are of use."
"Every cost must be justified and total profit must be the goal." *
Axient predicted change in milk income 1997 v 1999
1997 1999 Change
Milk produced (litres) 740,278 806,665 +66,386
Milk price (ppl) 25.17 18.63* -6.54
Leasing cost/litre (ppl) 13.06 7.00* -6.06
Concentrate cost/t (£) 155.00 115.00 -7,300
Net milk price
after quota (ppl) 12.11 11.83 -0.28
Margin/litre
after quota (ppl) 4.40 5.90 +1.5
*Estimated figures.
Source: Axient, based on average 120-cow herd.