Bad year for diary farmers as costs soar
Dairy farmers lost over a penny on every litre of milk produced last year, as costs of production soared due to the appalling wet weather.
According to a report, published by accountant Old Mill at the Dairy Show yesterday, its dairy farming clients' average costs of production increased by 3.69p per litre in the year to March 2013, to 38.02p per litre. But their milk price only increased by 0.6p per litre, leading to an average 1.12p per litre loss across the client base.
"Last year was an annus horribilis for milk producers, with the perfect storm of high feed costs, awful weather and the usual lag in milk buyers responding with better prices," said Old Mill director, Pat Tomlinson.
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The exceptional weather meant annual milk yields on identical farms fell by nearly 500 litres per cow, to average 7,145 litres. Despite the herd sizes increasing by two cows, to 197, overall milk production fell by more than 72,000 litres. With generally poorer quality forage and cows having to be fed more during the prolonged housing period, feed costs jumped by 2.12p per litre, totalling 11.27p of the overall production costs.
Mr Tomlinson added: "While these figures are not altogether surprising, given the extremely challenging weather, it is interesting to note that the actual milk prices received by farmers barely increased on the year, despite all the public announcements on higher standard litre prices.
"This was because of poor milk quality due to lower quality forage, the higher spring volumes being sold at pre-increase prices, and perhaps some volume and seasonality bonuses being missed.
"But the fact is that milk processors only paid our clients 0.6p per litre more for their milk in 2013 than they did in 2012." he added.
There was clear need for more transparency and urgency in milk pricing, because while payments had increased more significantly on farm, it was the immediate cash position that presented the greatest challenge, he argued.
An enormous gap between the top quarter and bottom quarter of West dairy farms existed – with the best producing milk for 12.65p per litre less than the worst. But the top 25% sample was very different to the sample taken in the previous year, he added.
The less intensive farms were more resilient to the challenges of 2013 than the higher-output systems, he said.