No silver bullet for dairy industry’s price gap

A gap of up to 12 pence per litre (ppl) in the margins made by UK dairy farmers has been highlighted in a report published this week by the Agricultural and Horticultural Development Board (AHDB).

However, the latest edition of the annual ‘Dairy Performance Report’ which examined data for a range of herd types – including all-year-round, autumn and spring block calving herds across Great Britain - showed that there was no one silver bullet as far as systems were concerned for ensuring high returns.

“The most profitable farms do not look the same,” said Kate Ward, AHDB Farm Economics Senior Analyst: “The key is to operate the system that suits you, your local surroundings and your market, and to do it well.”

The report showed that the top 25 per cent and middle 50 per cent of farms across all calving systems made a positive full economic net margin.

“The report shows a significant variation in cost between farms and emphasises the importance of sound cost management to ride out any future milk price volatility,” said Ward.

The most profitable farms delivered consistently higher margins and lower costs regardless of calving pattern, although there was some variation:

Top all-year-round calving herds made 12 ppl more margin than the bottom 25 per cent and costs were 10.5 ppl lower Margin was 9.2 ppl higher and costs 9 ppl lower for the top autumn-calving herds compared with the bottom quartile.

The best spring-calvers delivered 10.9 ppl more margin and 8.4 ppl lower costs than poorer performing herds.

Ward said that this had highlighted the fact that the main cost drivers for the difference in net margin between the top and bottom farms were herd replacements, feed and forage, power and machinery and unpaid labour.

“The report enables dairy farmers to compare their own business with others operating the same system and helps them identify areas where changes can improve profit margins,” said Ward.