New report prompts the Welsh Government to reassess the help that less efficient farmers need.
Some dairy farmers in Wales have never made a profit on the milk they produce and survive on subsidies alone, a new report has found.
Even in boom times, the worst performing farms have production costs that are the “beyond levels the milk price has ever reached”.
A report published this week on the state of the Welsh dairy industry shows that in 2016-17, when milk prices were low , three-quarters of farms were unprofitable, with the worst-performing 25% making an average loss of 14.2p per litre (ppl).
The reports’ authors said the findings “suggest there are some fundamental problems with the structure of many farms and possibly the industry”.
But they also stressed the best 25% performing farms “demonstrated that profitable dairy farming is possible” even in difficult trading conditions.
As a result, rural affairs secretary Lesley Griffiths vowed to reassess the help that less efficient farmers receive, and to roll out benchmarking to see where improvements can be made.
“I am in the process of tailoring the support we offer these farms to help them re-evaluate the structure of their business,” she said.
“It is clear that by becoming more efficient and focusing on producing milk at a lower cost of production, all farms can become more profitable, no matter what the milk price is.”
The report, produced by the Agriculture and Horticulture Development Board (AHDB), is the result of a benchmarking scheme implemented as part of a £3.2m EU conditional aid scheme for Welsh dairy farmers.
Some 75% of Welsh dairy farmers took up the opportunity – the highest uptake in the UK. Once “unbelievable” submissions had been excluded, this fell to 62%, or 1,068 farms out of an all-Wales total of 1,723.
Other findings in the report included:
Fewer than 2% of country’s herds are producing 13% of all its milk, and just 19% of dairy farmers are aged 40 years or younger.
Moreover, younger farmers tend to have larger herds.
The average farm employs 3.5 staff, or one for every 49 cows, though smaller farms use more labour per cow: on very small farms (less than 50 cows), labour costs are £645 per cow; on very large farms, this falls to less than £300 per cow.
But while labour and machinery costs are more punitive for smaller outfits, the report authors stressed: “This is not to say that big farms are, by definition, more efficient than small ones.
“There are many good small farms, in the same way there are poor large operators.”
Some 81% of dairy herds operate an all-year-round calving pattern. Two-thirds of all farms – equating to 56% of cows – graze their cows for between 183 and 273 days per year.
Larger herds tend to graze for longer than this – or not at all – and are making more money despite using more nitrogen as they have lower feed costs.
Only 10% of farms have aligned or balancing contracts and many of these plan to increase their herd sizes over the next five years.
If this happens, 29% of the increase in milk volume will be from herds of 300–499 cows and 8% from farms with over 500 cows.
Just over 6% of farms are organic and on average these get 13ppl more – a 60% premium – than for non-organic milk.
They also receive six times more income from Rural Development subsidies.
All participating farmers in the study received a bespoke report showing the strengths and weaknesses of their business.
NFU Cymru is now urging the Welsh Government to implement the “incentivised collection” of performance data in all sectors.
Not only would this benefit individual farms, it would help inform policy makers, said deputy president Aled Jones.
He added: “This data can also help underpin the credentials of ‘Brand Wales’, giving Wales with a unique selling point to market the full range of goods and services provided by Welsh farming.”
By: Andrew Forgrave
Source: Daily Post