Reduced costs was the main difference between top and bottom performing dairy businesses according to Old Mill and the Farm Consultancy Group
Costs were the key determiner of whether a dairy business was profitable, not milk price or contract terms.
The Milk Cost of Production Report from accountants Old Mill and the Farm Consultancy Group found dairy farmers’ profits have recovered in 2019/20 following a fall in 2018/19, mainly on the back of reduced purchased feed costs.
However, there remained a big gap between the top and bottom producers, with the top 10 per cent averaging a profit of 12p/litre compared with a loss of 5.48p/litre for the bottom 10 per cent, with 24 per cent of the sample not breaking even.
According to Old Mill rural accountant Dan Heal the most important factor for success was being driven and a desire to make a profit.
Milk price was not the key determining factor, with costs tending to follow any increases. And success was also not defined by a particular system, but by choosing the system which best suited the farm.
Bigger herds were also not a shortcut to profitability.
“If you just try and grow, you are in danger of losing even more money if you were losing beforehand. Get better before you get bigger,” he said.
Reducing the ‘cost of work’ was vital, with Mr Heal advising people to consider when it was best to do something in house and when to use contractors.
Quick wins included looking at the cost of running the parlour, bedding costs and more proactive veterinary treatments such as vaccination.
Gerard Finnan from The Farm Consultancy Group added: “I would encourage people to cull the lowest 5-10 per cent.
“Farms find they get rid of the lowest and production remains the same.”