Razor thin profits in 2013 shows how badly we need better weather

IN JANUARY of every year my discussion groups hold a meeting where they compare their financial performance, in a similar way to those completing the profit monitor.

At this stage with over 70 accounts compared, I can say that profit only increased by 0.64c/l.

This was despite average milk price being 8c/l, or almost 20pc higher than 2012.

It’s dismal reading but it's the harsh reality of the weather and fodder supplies that came with 2012 and 2013.

As John Donworth recently pointed out on these pages, feed, fertiliser and contractor charges were the big offenders. The average price for these commodities and services rose substantially in 2013.

Even though prices increased it's no surprise that farmers' strategy was to keep feeding their cows to keep the milk flowing, or simply alive in some extreme cases, as fodder suppl i es hi t zero during a prolonged cold spring.

In a bid to encourage grass growth, replenish winter feed supplies, and avoid exposure and risk to excessively high fodder prices the use and spend on fertiliser and contracting was then subsequently increased.

Having realised the importance of the these variable costs on the bottom line, in recent years I have asked my farmers to quantify the use of concentrate feed, purchased forage and fertiliser.

Almost 95pc are spring calving and grass based. The results show that the milking cows were fed an average 775kg meal per head. This was actually 9pc up from the previous high of 710kg in 2012.

However, the range between farms was colossal, from a minimum of 190kg meal per head to a maximum of 1,730kg meal per head.

When this 9pc increase in use was combined with higher meal prices it resulted in a 21pc rise in the total cost of feed for my farmers.

APPLICATION

There was a similar story in relation to the use of nitrogen fertiliser. In 2013, my clients spread 206kg of nitrogen per hectare on average. This compares to an application rate of 183kgN/ha in 2012, or a rise of 13pc.

The bottom line was that fertiliser and lime costs increased by 26.5pc.

However, I was relieved to see that even with all these increasing costs, farmers also upped their use of phosphate and potassium fertilisers to try to combat the huge issue of falling soil fertility.

How did the cows perform with this high use of purchased concentrate? On average cows produced 4,508l or 359kg of milk solids (MS) in 2013 compared to 4,431l or 351kgMS per cow in 2012. This is only a 2pc increase in production.

For those of you wondering if this lack of response to meal was a result of the type of cow that the majority of my farmers milk, I can tell you that those figures cover farms with herds of Holstein Friesian cows, crossbreds and once-a-day herds.

The maximum production per cow was 6,020l or 496kgMS per cow, so I'm confident that these figures are not influenced by breed.

As we face into 2014, most dairy farms are in a better place than they were this time last year.

There is more silage, and each tonne of silage is much better quality than that produced in the dull and wet year of 2012. This is especially true in the wetter, western parts of the country.

However, I do hope that mother-nature will give us a break from bad weather.

There is a real need for a more normal year in terms of feed, fertiliser use and silage making to allow the better milk prices to be retained by the farmer, rather than flying straight through the farm gate t o f eed and f er t i l i s er suppliers.

While one may think that this statement is knocking those industry stakeholders, the reality is that feed, fertiliser use and silage-making decisions all sit with you, the farmer.

So if good weather prevails we must make sure to capture its profits.