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Dairy farmers urged to 'think margins, not output'

The future profitability and sustainability of dairy depends on a shift away from focusing on output and making efficiency and margin over costs the top priorities.


Alex   Black

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Alex   Black
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Dairy farmers urged "think margins, not output" #teamdairy

EU vote could be worth 2ppl #teamdairy #brexit

That was the message to emerge from AB Vista’s Business Insight Seminars in Coventry last week.


The firm’s sales and marketing manager Josh Daly said: “It appears there is no close link between the number of litres produced and profitability, it is how those litres are produced which matters.”


Jason McMinn, Farmgate Consultancy, said increased values for butterfat and milk protein bonus payments meant higher milk solid levels was one of the most effective ways to improve margins.


Michael Oakes, NFU dairy board chairman, agreed with the recommendations.


“It is difficult advice," he said.


“The farmers do not want to hear this. That includes my business, I do not like it. But we have got to be as efficient as the best.”


Mr Oakes said farmers were already switching their focus in response to the current crisis in dairy but they needed to make sure the emphasis was still there once prices improved.


“If anyone hasn’t already responded to this, they have their head in the clouds,” added Mr Oakes.


“We all want the market to improve but we are in a volatile market. The market will go up and down.


“[When the market lifts] we might have a different mindset. It is just trying to make sure everything is still concentrating on margins even in a better market.”

 

EU vote could be worth 5ppl

The results of the EU referendum could have a huge effect on the dairy industry, one analyst has claimed.

 

Dairy prices have increased sharply over the past few weeks, partly due to falling milk supplies.

 

The price of sterling will be the key factor going forwards for milk price, said industry analyst Chris Walkland.

 

He said in the event of a vote to stay, sterling could increase to £1.40 against the euro, but a vote to leave could see it fall to £1.10-£1.20.

 

The voting results could be worth 5ppl to the dairy industry, with the same commodities coming at very different prices," said Mr Walkland.

 

At 18ppl, that amounts to 27 per cent of the price of milk.

 

"For example, if you take the price of Dutch butter at €2,800 per tonne, at £1.40 this is worth £2,000/t compared to £2,525 at £1.10," he added.

 

However, a fall in sterling could be good news for exporters.

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