Dairy Group's research shows sector's struggle

Ian Powell, director of The Dairy Group, was moved to dig deep into the figures by reports which showed a big improvement, over 10 years, in the margin between the price of milk and the feed costs going into it.

Feed has more or less doubled in price and milk has not, so the improvement is down to efficiencies – which should benefit the farmer. But Mr Powell's analysis shows how productivity gains have all been eaten away before the farmer and his family take a share – the figure shown in the table as "unpaid wages", which is assumed to be 25,000 a year nowadays for each full-time equivalent.

After that, it seems, the average litre over '08-'09 cost the average dairy farmer 1p more than income for milk and spare livestock.

So the overall position has actually worsened since the year 2000 – and is not likely to have improved much when the '09-'10 figures are confirmed. His forecasts for the current year include falling milk prices as well as some costs which have dropped since the peaks of '08-'09.

Single Farm Payments are not included and explain how the whole structure totters on in hope of a new dawn.

The figure for "valuation change" reflects average herd improvement. Property costs are running costs and do not include any figures reflecting land value.

The figures in the table are averages and Mr Powell said: "The other striking feature of our analysis is the massive range in dairy costs, which in '08-'09 were from 22.5 ppl to 42.7 ppl."

Herds producing to a seasonal cycle based on spring calving and grass feeding had some of the lowest costs and those attempting 365-day consistency for the big dairies had some of the highest, he commented.

He said: "With the average milk price around 25 ppl and our forecast production costs of 28 ppl, there is an urgent need for every dairy business to understand their costs and have a clear strategy."

The Dairy Group – www.thedairygroup.co.uk – is a national business with HQ at 01823 444488.