Sheer size of milk price cuts

21 March 1997

Sheer size of milk price cuts

shock the Lees

Preparing for a smaller milk cheque is the priority at Dowrich this month, as Philip Clarke reports

CUTS in milk prices are set to knock about £35,000 off the bottom line at Dowrich, our adopted farm in mid-Devon.

According to latest farm costings, February milk earned the Lees 26.4p/litre, after allowing for a 0.2p deduction for a band 2 cell count.

But applying the new Milk Marque constituent payments that come into force on Apr 1, that price falls to 23.7p/litre – a drop of 2.7p.

This is bigger than the 2.5p/litre headline figure published last week, reflecting the higher than average butterfat and protein achieved by Dowrichs 232 milkers.

Across a full years production, this price fall represents a loss of just over £35,000.

"I am not surprised that milk values have come down. We always knew that the high prices following vesting day would not last for ever," says Anthony Lee. "But I have been surprised by the size of the cut."

Currency factors are only partly to blame, he says. "Dairy companies over-stretched themselves as they tried to get more farmers to sign up direct. Faced with falling profits, shareholders have put pressure on them to cut costs.

"As a result, they have used Milk Marques selling system to wind prices down."

New Office of Fair Trading rules have helped them in this endeavour, observes Anthony. But, more fundamentally, Milk Marque has lost members all too easily, and with them has gone negotiating clout.

The cut in prices will impact directly on herd margins. "We have already seen some downturn as a result of slightly lower prices in the past 12 months," says Anthony. This has combined with lower yields and higher concentrate costs.

February figures from Genus show margin over purchased feed fell 0.7p to 21.46p/litre, with yield down 2.5 litres to 15.4 litres a day and feed costs up £42 to £176/t compared with year-ago figures.

"The feed price increase is mainly due to soya. I did not buy as much forward as in previous years, expecting prices to fall. But, despite the strength of sterling, soya has remained obstinately costly." Lower yields have been a problem for much of the winter, with no obvious explanations other than the weather.

The effect of these is now starting to show up in the 12-month rolling figures. Margin over purchased feed a cow has fallen £67 in the past year to £1217. The drop in milk prices from April is expected to take off another £148 a cow.

These are serious numbers, and will require careful management to mitigate the effects.

"We must continue to strive for as much yield from forage as possible," says Anthony. The cows, which are due to go out in the next few weeks, will return to a system of paddock grazing, moving each day in a three-week rotation. This cuts down trampling and gives them a fresh bite every day.

Maize is also due to be planted on 61 acres – 21 more than last year – while six acres of wheat is already in the ground for whole-crop silage.

But the biggest opportunity is to improve milk quality and cash in on new Milk Marque hygiene bonuses from Apr 1. These will pay 0.2p/litre for Bactoscans below 50,000/ml on a two-month average and 0.2p/litre for somatic cell counts below 150,000/ml on a three-month average. Another 0.2p/litre is available for those who achieve this top quality on a 12 month rolling basis.

Currently, Dowrichs milk would miss out on all these bonuses. "But we should easily be able to get our Bactoscan below 50,000," says Anthony. This has been ticking along at 60-70,000 during the winter. But a two-week trial with a new powder-based cleaning agent in the parlour and dairy last month saw this drop almost instantly to 20-30,000. "Powder is significantly more expensive than our current liquid agent, so we are currently getting quotes from a number of possible suppliers."

Getting cell counts down is more of a problem, Anthony admits. These are currently coming back at just over 250,000, which would incur a penalty of 0.5p/litre. Getting them below 250,000 should be easy, but reaching the 150,000 bonus threshold will require a ruthless culling policy.

"We do monitor individual cell counts with National Milk Records, so we know which cows are the problem makers. Their milk is already being syphoned off and fed to calves."

Anthony plans to send another batch for slaughter in the next few days, catching the over-30-month scheme before a green £ revaluation on Mar 29 takes another few pence off the compensation payment (currently 138p/kg deadweight). &#42

Keith Gliddon (left) of service company Cowco South-West freeze brands one of the Dowrich heifers, helped by general farmworker Graham Baker.

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