4 minute read
DAIRY MATTERS
DAIRYMatters
Kathryn Rowland has been at Kingshay for 20 years and originally hails from a dairy farming family. Heading up Kingshay’s farm services team, she has overseen the recent publication of the 11th edition of the annual Dairy Costings Focus Report.
The UK dairy industry has certainly seen its fair share of challenges; producers are having to juggle rising costs and labour challenges with contract obligations and seasonality, as well as respond to growing consumer demands and market influences.
But there are some tremendous opportunities too. Small improvements can have a big impact on the bottom line and producers could be making more out of their milk contracts, as reflected in the latest Dairy Costings Focus Report.
Producers have doubled down on efficiencies and succeeded in boosting margins, health and fertility across the board. Margin over purchased feed (MOPF) averaged £1,920 per cow and 22.71ppl – some £206/cow and 2.57ppl more than last year.
In the last five years, cases of lameness and mastitis have fallen from 43 and 41 cases per 100 cows to 35 and 30 cases per 100 cows, respectively.
In fact, cases of all diseases in the report declined, demonstrating the correlation between improved health and fertility gains.
Calving interval rolled back by four days to 393 days and service also improved to 2.3 services per conception. And while there was no change to conception rate (38%) and culling for infertility (6.7%), there was an improvement in both the 100-day in-calf rate and the 200-day not in-calf rate, the latter falling sharply from 16% to 13%.
Fertility remains the leading reason for cows leaving the herd at 25%. But the static culling rate, alongside this year’s fertility gains, indicates that producers have tightened up their breeding management and become more efficient.
Milk from forage has also been very strong over the last couple of years, despite falling shy of predictions. This year there have been a few challenges and forage quality was not quite there for some herds to get the best yields.
Within every production system there is a wide efficiency range. But even high margins are quickly being eaten into by soaring overhead and input costs and the cost of inefficiencies only becomes more pronounced as prices rise.
The milk price has soared, starting at 29.2ppl (March 2021) and closing at 36.9ppl (March 2022), averaging 33.6ppl for the year ending May 2022.
Last year’s report
When we did this report this time last year we could not have predicted what has happened, but who could have? Luckily, the increase in milk price has tracked input costs and costs of production. Nevertheless, this could change. Is 50ppl as high as milk prices will go or will they rise further?
In March, concentrate prices were averaging £274/tonne, with total feed costs at 9.34ppl.
Ammonium nitrate prices had rocketed to £839/t, while red diesel had jumped to 96ppl.
Health and fertility are a case in point for making significant marginal gains. The average cost of all health issues has increased by a staggering 28% to £29,068, with increased costs and a high milk value.
All estimated costs per case have gone up on last year; mastitis and lameness by £90 and £109, respectively. There still remains a huge gap between the top quartile of producers and the average, worth £13,482 in health costs.
While higher cull values and enhanced
efficiencies have seen infertility cost drop by 9.6% to 187ppl, further gains can be made. At a cost of £5.23/cow for each extra calving interval day, the sums quickly add up; £1,046/day in a 200-cow herd.
Not maximising forage use will be costly. Ranked by milk from forage, purchased feed costs ranged from 7.85ppl in the top 25% to 11.13ppl in the bottom 25% – a difference of £52,692/year for a 200-cow herd. Winter feed costs are looking like they could be £40-£60 higher than summer contracts.
So where do I think this is all going? I would love to get my crystal ball out and say what the market might do over the next 12 months; Brexit, Covid-19 and Russia’s invasion of Ukraine will likely have a lasting impact and industry experts indicate that costs are not going down.
Looking ahead, there is a massive range in efficiency across systems and it is wider than ever. Some herds are losing money while some are nervous of tax bills due to considerable profit. And while producer numbers are declining, there is potential for shared farming partnerships to encourage younger entrants into dairy farming.
Keeping pace
To keep pace, producers need to analyse costs of production quarterly and MOPF monthly and update forward budgets frequently to closely monitor financial performance.
Invest in areas which will future-proof your business. For many reinvesting in their swards, infrastructure, cow management and cow comfort have paid dividends and helped lower tax – shiny, new tractors need not apply.
Not maximising forage use will be costly going forward, says Kathryn Rowland.
Decades of experience providing Dairy Cattle Finance to UK Agricultural businesses
01904 405299
