Back to Basics:
Guidelines for
Profitable Dairy Farming
Michael Verner
25 January 2011
Outline
OUTLINE
 Where we are today
 Does milk from forage matter?
 How important is feed efficiency?
 Are there economies of scale?
 The prospects for 2011 and beyond
£/tonne
Feed and fertiliser
prices:
- 2010
Feed and Fertiliser
Prices2000
- 2000-2010
350
300
250
200
150
100
50
0
2000
2002
2004
2006
2008
Year
Milk
Fertiliser
Concentrates
2010
2012
The rising cost ofThe
production
Rising Cost Of Production
Does milk from forage matter?
Does Milk From Forage matter
How we’ve changed How we’ve changed
Herd size
Milk yield
(litres/cow)
MFF
(litres/cow)
2000
2010
Change
83
129
+46
6000
6710
+710
3222
1887
-1335
The ‘real’ cost of forage
The ‘real’ cost of forage
Feed
Cash cost
(£/t utilisable DM)
Full economic cost
(£/t utilisable DM)
Grazed grass
44 (35 – 56)
80
3 cut silage
76 (69 – 109)
122
74
123
Forage maize
77 (72 – 162)
121
Concentrates
250
254
Wholecrop wheat
Definition: Net Profit
(£/cow)
Definition: Net Profit (£/cow)
 Net profit = Output – (Variable costs + Overhead Costs)
Variable costs
Overhead costs
Forage
Concentrates
Vet and Med
AI
Miscellaneous
Machinery running costs
Contractor costs
Depreciation
Property repairs
Business costs
Miscellaneous
Labour
Conacre
Finance / Interest
Milk from forage and net profit
Milk from forage and net profit
500
450
400
Net Profit £/cow
350
300
250
200
150
100
2%
2%
4%
11%
22%
21%
38%
>4000
3500 to 4000
3000 to 3499
2500 to 2999
2000 to 2499
1500 to 1999
<1500
50
0
MFF litres/cow
Does milk from forage matter?
Does milk from forage matter?
“The man with
money and
grass will not
waste the
grass”
How important is feed efficiency?
How important is feed efficiency?
How we’ve changed
How we’ve changed
2000
2010
Change
83
129
+46
6000
6710
+710
1250
2170
+920
Herd size
Milk yield
(litres/cow)
Meal fed
(kg/cow)
0.21 kg/litre
0.32 kg/litre
Milk yield versus meal fed fed
MILK YIELD : MEAL FED
9,500.00
MILK YIELD/COW (LITRES)
8,500.00
2.5 tonnes
8000 litres
7,500.00
6,500.00
2.5 tonnes
6200 litres
5,500.00
4,500.00
3,500.00
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
MEAL FED/COW (KG)
3,000.00
3,500.00
4,000.00
4,500.00
Measures thatMeasures
matterthat
– Feed
matterrate
– Feed rate
Example
100 cow herd selling 7,500 litres/cow from 2 tonnes of concentrates
Buys 200 tonnes of dairy concentrate
Sells 750000 litres of milk
Farm has a feeding rate of:
(200 x 1000kg) = 200000 = 0.26kg/litre
750000
750000
The link between
ratefeed
and
The feed
link between
rateprofit
and profit
400.00
300.00
293
301
292
256
200.00
178
Net profit £/cow
8%
8%
17%
28%
28%
100.00
8%
3%
82
0.00
<0.20
0.20 - 0.25
0.26 - 0.30
0.31 - 0.35
0.36 - 0.40
0.41 - 0.45
>0.45
-100.00
-200.00
Example farm = 0.26kg/litre
-202
-300.00
Feed rate kg/litre
Feeding Method
Feeding Methods
Herds fed concentrates;
 In parlour
£300/cow net profit
 In OOPF
£280/cow net profit
 Via TMR
£180/cow net profit
(range: loss of £300 to profit of £600)
Successful TMR feeding
Successful TMR feeding
 Feeding quality forage(s)
 Batching cows
 Feeding to the lowest yielding cow in group and ‘topping up’
 Moving cows as yield declines and adjusting parlour feeding
 Calibrating parlour feeders
 Checking crude protein of ration esp. with inclusion of maize
 Staff understanding
How important is feed efficiency?
How important is feed efficiency?
“Margin is
sanity,
volume is
vanity”
Are there economies of scale?
Are there economies of scale?
Total profit from dairying
Total profit from dairying
40000
35000
Profit from dairying
30000
25000
20000
15000
100 cows
170 cows
10000
5000
8%
15%
19%
25%
<50
50-74
75-99
100-149
20%
13%
0
Herd size
150-200
>200
Total profit from dairying
Total profit from dairying
40000
35000
Profit from dairying
30000
25000
20000
15000
10000
5000
Little expansion regain performance
Controlled expansion maintain performance
0
<50
50-74
75-99
100-149
Herd size
150-200
>200
Are there economies of scale?
“Get better
before you
get bigger”
The prospects for 2011 and beyond
The prospects for 2011 and beyond
The answers!
The answers
 Does milk from forage matter?
Yes - High quality grazed grass and grass silage are vital to
ensure future profitability
 How important is feed efficiency?
Very – Concentrates are the single biggest cost on most dairy
farms
 Are there economies of scale?
Probably – but make sure performance is good and then
expand gradually, remember profit equals margin x volume!
What are the prospects?
What are the prospects?

Good prospects for milk prices despite volatility

Input costs will remain high or further increase

Quality forage has an essential role to play in maintaining
our competitiveness

The top 50% of Northern Ireland dairy farmers have a
profitable and sustainable future
Benchmarking – what’s it all about?
Benchmarking- what’s it all about?
 Do you know what level of profit your business is making?
 Do you know how each category of your costs compares to
other farmers in Northern Ireland?
 Do you know what are realistic physical and financial
performance targets for your dairy system?
 Benchmarking – “Measure to Manage”