HOW MUCH DOES IT COST YOU TO PRODUCE A LITRE OF MILK?
For many dairy farmers, the March/April 2016 accounts did not make for pleasant reading. Whilst 2017 has been somewhat of a recovery period with welcomed milk price increases which have in turn resulted in improved overall retained profits, rising input prices means that cost control is still important.
We have carried out a survey of our clients where their income is predominantly from dairying, investigating herd performance and production.
As the below table shows, the level of retained profit has improved slightly in 2017, despite cost increases of 0.36ppl. Whilst it initially looks concerning that the breakeven milk price is so much higher than the average price received, remember that this does include drawings and that you have ‘lived’ out of this.
|Average milk price||26.48||24.63||1.85|
|Cost of sales||16.52||14.71||1.81|
|Breakeven milk price||32.83||32.48||0.35|
|Cost of getting work done||9.16||9.51||(0.35)|
|Cost of rent and finance||3.08||2.61||0.40|
With many suppliers now receiving 30ppl we can be hopeful that the 2018 accounts will be even stronger, however, continued cost control is imperative for the future of input prices also expected to rise.
Finally, we encourage you to compare your costs per litre in order to benchmark your business with others and to draw meaningful comparisons. If you would like further advice on your cost of milk production please do not hesitate to get in touch.
The Albert Goodman agricultural team have written extensively on Dairy Farming and on the economics of milk production. The team contributes regularly to the Dairy Farmer magazine and recently held at lunch at the prestigious Dairy Show which is held every year at the Royal Bath & West Showground near Shepton Mallet in Somerset.