Analysis of CAFRE farm benchmarking results for 2021 shows that it cost the bottom 25% of farm businesses 8.8p more to produce one litre of milk than the top 25%.

Explaining the figures at a recent event held on the farm of Philip and Adrian Kyle, Aughnacloy, Co Tyrone, CAFRE’s Martin Reel said that the bottom 25% ended up with a net profit (excluding family labour) of 1.3p/l. However, the top 25% had a net profit in 2021 of 10.1p/l.

“There are huge differences at farm level. The top 25% use more feed and fertiliser, but they get the output in return through better feed efficiency,” said Reel.

While milk prices have risen consistently during 2022, costs are also at record levels. In 2020/2021 benchmarking, concentrate and forage accounted for 67% of variable costs. As a result, the recent hikes in feed and fertiliser will have a significant impact.

To illustrate the point, Reel said that in 2020/2021 benchmarking the average cost of concentrate was £258/t. Every £50 increase in price adds 1.61p/l on to costs, so on the average dairy farm, a concentrate price of £400/t equates to 4.6p/l of higher costs.

Doing the same calculation for fertiliser, Reel said a price of £700/t effectively puts 3.52p/l on to costs when compared to 2020/2021 when fertiliser was priced at £230/t.

With energy prices also rising sharply, Reel estimates fuel, electric and contractor charges will equate to an extra 1.5p/l when compared to 2020/2021. Given recent increases in red diesel, he accepts this may be a slight underestimate.

When added together, the CAFRE figures point to key variable costs that are up nearly 10p/l in the last year.

So how should farmers respond? “Invest to make your business more efficient and more streamlined. Don’t cut back on vital spend such as animal health or fertility. Carry no passengers and maximise your bonuses, whether it is TBC, cell count or fat and protein,” said Reel.

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