Despite skyrocketing feed and fertilizer production costs, dairy farm profits averaged £ 185 per cow in 2020/21, according to a new report.
The cost of producing milk report – carried out by rural accountant Old Mill and the Farm Consultancy Group – found average farm profits had risen from £ 233 per cow in 2020/21 to £ 185 / cow last season.
“This is because of the drop in the price of milk, the increase in feed costs and the prices of straw to levels never seen before, so keeping profits at this level is all the more up to the mark. honoring the dairy industry, ”said Dan Heal, Rural Advisor at Old Mill. .
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This is the fourth year in a row that profits have remained above the £ 100 per cow bracket, with higher yields offsetting lower milk prices. Average yields increased by 151 liters / cow due to a favorable milk / feed ratio and good quality forage. However, the total cost of production – at £ 2,393 / cow – was on average higher than the dairy income of £ 2,321 / cow.
This loss was offset by a rebound in non-dairy income thanks to the improvement in the beef market. Herd size also declined – from 307 to 269 – as farmers slaughtered their less productive animals harder.
The top 10% of producers still far outperformed the bottom 10%, due to tighter cost control as well, with the bottom 10% incurring additional costs of £ 1,097 / cow, spending an average of 2,954 £ / cow. This gap had widened from the 2019/20 average of £ 950 / cow.
“Although overall profitability has declined from last year, the gap between top performing and worst performing herds has widened significantly,” added Mr. Heal.
The top 10% spent £ 320 / cow less on feed and £ 261 / cow less on labor than the bottom 10%, while the income brought in was £ 231 / cow higher. This is despite the fact that the best farms produce lower yields of 7,229 liters per year compared to the average of the lower farms of 7,483 liters.
“There is a wide range of production levels in the top 10% – from 4,828 liters / cow to 9,711 liters / cow, showing that the focus on efficiency pays regardless of yield. Less efficient setups probably require an investment to change this.
Although organic farmers are excluded from the top 10% versus bottom 10% statistics, their performance has been mixed, with some producing in the top 10% of conventional farms and others in the bottom 10%.
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Overall, labor costs have increased by £ 27 / cow, compared to £ 458 / cow in the 2019/20 season. Electricity and machinery costs have also increased, from £ 19 / cow to £ 543 / cow.
In the 2021/22 season, labor, energy and machinery costs are expected to continue to rise, with profits expected to drop to £ 167 / cow, especially as marginal liters become unprofitable to produce, says Heal. The cost of production is expected to be £ 2,354 / cow against an expected dairy income of £ 2,165 / cow, down from £ 66 / cow as yields decline due to higher feed prices.
However, non-dairy incomes are expected to rise again, by £ 365 / cow, in response to the dynamic livestock market.