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Milk price rises boost profitability - but market prices 'very volatile'

Headline profits have made a remarkable recovery in the year to March 2018, according to business consultancy Promar.

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Interim figures showed a herd of 205 cows – the survey average, will have left a profit of £125,000 in the year, a huge increase on the £43,404 recorded in the previous year.

 

The boost is largely due to a lift in milk price of 4.98ppl, although physical outputs have also increased, with herd size up by five cows and yields by 241 litres per cow.

 

Warning

 

Promar’s national consultancy manager Nigel Davies however warned producers not to get carried away.

 

“Remember this is not cash. The profit has to cover private drawings, loan repayments and investments. It is important also to understand the tax implications.


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“It is good to have something tangible to show for a good profit, such as buildings or equipment or a meaningful reduction in outstanding debt.”

 

Benchmarking remained important with the Promar analysis showing big differences in performance.

The top profit of £885 per cow greatly exceeded the average of £437 per cow. The disparity had little to do with herd size or milk price.

 

Going forward, Tim Harper, Promar head of data, said there was a ‘volatile background’ to the dairy market.

 

Challenges

 

Apart from weather challenges, the increases in oil prices stemming from President Trump’s cancellation of the Iranian nuclear deal were feeding through into general farm inflation.

 

The Brexit effect was as yet unknown and currency exchange rates were subject to fluctuation.

 

Dairy farm profitability was unlikely to reach the same highs this year. Mr Harper predicted prices were likely to drop to about 28.5ppl by June but this was from a reasonable base – milk prices were 5ppl higher than they were at the low point of June 2016.

 

Internationally, the New Zealand Government was still culling hard in an attempt to control the M.bovis disease which could affect volumes. Australian output was up and the US was continuing to grow its dairy industry steadily.

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