Dairy consultancy The Dairy Group has projected losses of 4.1 pence per litre (ppl) for dairy farmers over 2015/2016. The predictions were based on analysis of accounts of specialist dairy farms. The analysis does not include any non-dairy income, the Single Farm Payment or the rental value of owned land, but does include the value of unpaid family labour.
Profit declines
Results showed the average profit from the dairy enterprise of 0.2ppl, which was a decline of 0.4ppl on the previous year. The report said that average production cost had decreased by 1.1ppl since the previous year. Variable costs such as feed decreased, whilst wages, rental and finance costs increased. To work out projected losses, The Dairy Group started from the actual position at the end of 2014/15, and used milk market price trends and Defra reports of other price trends to make predictions. The projected losses of 4.1ppl are expected to occur despite the average cost of production reducing by 1.6ppl to 31.5ppl, which is insufficient to offset the forecast milk price fall of 6.0ppl.
Poor outlook
The Dairy Group’s Managing Director Ian Powell said: “It is very disappointing to report such a poor outlook for our average dairy farmer with milk sales of almost 2 million litres, supplying some of the highest quality milk in the world to some of the richest consumers in the world, but such is the lament of weak sellers of a perishable product in an over supplied market.” The report said that these averages hid a wide variation in farm performance, and some farms would be better able to sustain such losses than others.
The Dairy Group added that farmers could try and withstand these difficult times by reducing capital expenditure, increasing borrowing, and using non-dairy income to subsidise dairy loss. In addition, the group suggested minimising feed costs by taking another look at forage quality and how to best support milk production with supplementary feed.
Thanks to TheDairySite.com for this summary.
