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Profitability up but UK dairy farmers' profits only tell half the story

Profitability was up during a ’successful’ year for UK dairy farmers – but profits only tell half of the story.


Alex   Black

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Alex   Black
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UK dairy farmers' profits only tell half the story

According to Promar’s latest Farm Business Accounts, average dairy farm profits were £96,318 for the year ending March 2018, up from £53,130 a year earlier.

 

This was driven by a 2.86ppl average 12-month milk price increase, improved yields per cow, an increased herd size and average feed use staying level.

 

But Promar’s figures show, after drawings and tax, repayments of loans and net capital spend, businesses were left with a deficit of £85,152 before any new debt was introduced.


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Drivers of success

  • Average 12-month milk price up 10.7 per cent to 29.61ppl
  • Average Rolling Yield per cow up 2.26 per cent to 8,498 litres
  • Average herd size up by four cows to 211
  • Average Feed Use stayed level at 0.36 kg/litre
  • Total variable and overhead costs increased in excess of inflation by 6.9 per cent and 5.6 per cent respectively
  • But increased output meant this was an increase in total costs of just 2.1 per cent per litre

Nigel Davies, national consultancy manager at Promar, highlighted some of the differences between top performing farms and the average, with smaller herds, higher yields and better concentrate efficiency.

 

“Very little is to do with milk price. There is 0.1ppl difference between them,” he said.

 

Health

 

The top farms also had better cow health with lower replacement rates and better fertility performance, as well as lower bedding costs, feed costs and dairy sundries costs.

 

Wages, power and machinery, property and debt per cow were also lower.

 

“They are able to spend £236 per cow more. They have the ability to reinvest back into the business for future efficiency.”

 

Looking forward, Promar expected profit after depreciation to be under £40,000 for the year ended March 2019.

 

Issues for the years ahead included Brexit, the trade war between the US and China and its potential impact on economic growth, exchange rates and labour availability and an increasing number of significant weather events.

 

Advice

 

Mr Davies advised farmers to prepare now for the first half of 2019’s ’cash pinch point’ and feed and forage needs.

 

“One thing to remember is a lot of businesses have increased profitability. Most of them will have to pay some tax and that is going to impact the cash position at some point," he said.

 

He added they needed to be aware of the impact of losing support payments, currently worth equates to 1.91ppl, as well as continually looking to remove inefficiencies including managing labour and animal management, improving cow health and fertility.

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