Dairy farm profits in a costed group averaged £185 a cow in the milk year ended 31 March, a drop of £48 a cow on the previous year.
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Dairy farm profits in a costed group averaged £185 a cow in the milk year ended 31 March, a drop of £48 a cow on the previous year.

Falling milk prices, rising feed costs and straw prices at levels not seen before were just part of the mix pushing profits down.

Higher non-milk income from an improved beef market helped limit the fall in profits, with average herd size down from 307 to 269 head as farmers culled harder.

The figures come from The Milk Cost of Production report by rural accountant Old Mill and the Farm Consultancy Group. For ease of comparison between farms, the figures are before rent, interest payments, drawings, direct payments, tax and capital expenditure.

Dan Heal, rural adviser at Old Mill, said the sector had done well to maintain profit at this level.

“There is a huge range of production levels within the top 10% – from 4,828 litres a cow to 9,711 litres a cow – showing that a focus on efficiency pays, whatever the yield,” said Mr Heal.

Labour costs rose by £27 a cow to £485 a cow. Mark Yearsley of the Farm Consultancy Group said silage prices had jumped by 42%, with power and machinery up £19 a cow to £543 a cow.

Key points from milk costings report

  • Fourth year in a row of profits higher than £100 a cow – increased yields offset drop in milk price
  • Average yield rose by 151 litres a cow due to favourable milk-to-feed ratio and good-quality forage
  • Total cost of production of £2,393 a cow averaged more than milk income of £2,321 a cow
  • Top 10% spent £278 a cow less on concentrates than bottom 10%
  • Cost control meant the top 10% of producers had £1,097 a cow lower costs than bottom 10%, who spent an average of £2,954 a cow
  • The top 10% brought in £231 a cow more on an average yield of 7,229 litres a cow a year, compared with the bottom 10%’s higher yield of 7,483 litres

Looking ahead

In the current milk year, labour, energy and machinery costs are expected to continue to rise, bringing a prediction of profit falling to £167 a cow, as marginal litres become uneconomical to produce, said Mr Heal.

The gap between milk income and cost of production is projected to rise to £189 a cow as yields fall due to higher feed prices.

However, non-milk income is forecast to rise again, by £365 a cow, as beef prices remain high.

“Compared with the rollercoaster of 2020-21, the current season has felt quite stable up to now,” said Mr Heal.

“The milk price has been relatively static and although costs have risen rapidly, forage is in plentiful supply, certainly within the South West. All of this points to a winter where the focus needs to be on profitability rather than production, and to ensure any extra litres do indeed pay their way.”

The costed farms all have a 31 March year-end and earn their income mainly or solely from milk sales, across a range of farming systems.

While rent, interest, drawings, tax, capital expenditure and direct payments are excluded from the figures, a labour charge of £30,000 is included for each full-time partner or director in the business, and depreciation is included.

Aurora Dairies, one of the largest milk producers in the country, has added Gray Wigg Gault’s Clydebank Aggregation in Victoria’s Gippsland region to its expanding portfolio for around $20 million.

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