Wales’ top-performing dairy farmers make a net margin that is 9p/litre higher than the country’s average milk producers, according to new farm income data.
By: Debbie James
The figures are revealed in the 2016-17 Farm Business Survey in Wales, carried out by Aberystwyth University and drawing figures from a random sample of 511 farms across Wales.
After rent and finance charges, the results showed that the average profit a hectare for the top performing lowland dairy farms was £1,014 compared to £333 for all lowland dairy farms.
A principal reason for this big gap is a variation of more than 10p/litre in milk prices.
Survey director Tony O’Regan said although milk prices had risen steadily after hitting a nine-year low in June 2016, confidence and investment in the sector remained low because of higher feed prices, poor cashflow at the start of the year and concern over bovine TB.
Poor-quality grass and silage had affected yield in some areas, Mr O’Regan said.
However, better cull prices and the roll-out of the EU Milk Reduction Scheme had allowed some dairy businesses to restructure or exit the sector and boosted confidence levels among others.
The survey highlighted how reliant many farm businesses were on the Basic Payment Scheme (BPS), other subsidies and income from diversifications.
For hill sheep farms in particular, these three sources contributed an average of about 40% of total output, equating to 172% of profits.
“It is increasingly difficult to see how many Welsh farms can be profitable without relying on significant non-farming income and timely BPS payments,” Mr O’Regan said.
None of the profit-and-loss figures take into account the cost of the farmer’s own labour, so the true financial situation is more acute, he added.
“The dairy sector best illustrates this since labour and pension costs alone can add about 7-8p/litre, pushing top producers’ cost of production to more than 27p/litre and the bottom closer to 34p/litre.”