Cost of Production, Not Milk Price Affects Profit

UK - The relationship between cost of production and profit is much stronger than many farmers realise, says DairyCo’s first Milkbench+ report. It shows that cost of production is the most significant factor in determining profit.

17 January 2012

2 minute read

Europe

The report, which has been written using analysis of data from 330 farms across GB, sets out to offer GB dairy farmers an opportunity to see how they can make their businesses work hardest for their benefit.

Milkbench+ analyst Karolina Klaskova says: “Through robust data and statistical analysis we see that the relationship between cost of production and margin is strong.”

Ms Klaskova acknowledges that the findings are challenging. “The report raises many issues, including just how difficult it can be to make a profit from milk production,” she says.

“But there is a real opportunity for producers because once you have a good handle on your costs of production any extra increase in milk price will go straight onto your net margin.

“In the report we identify three key enterprise types and the factors that drive an increase in net margin for each of these systems,” she explains. “The impact that these factors have on returns varies considerably, but they demonstrate that the need to fit the system that you use to your own circumstances has never been more important.”

DairyCo director Duncan Pullar says: “As well as providing crucial information for dairy farmers this report will now help all those involved in supporting dairy farmers to target their farm improvement programmes more effectively.”