Milk price rise supports expected £85,000 improvement in profits

Milk price rise supports expected £85,000 improvement in profits
24 May 2018

Early consideration of the outcome for Promar’s national sample of farm business accounts, for the year ending March 2018, suggests that an upturn in milk price and improved technical performance is likely to contribute towards a £85,000 increase in farm profits for the average producer, compared to the previous year.

So says Promar’s Nigel Davies, explains that this figure reinforces the effect positive market conditions can have on profits. “In autumn 2017, we predicted an increase in profit for the average dairy farm, for the year ending March 2018, of in excess of £50,000 more than the £43,404 reported by the average in the sample in 2017."

Rolling milk price

“Although the fully audited results for the whole FBA sample won’t be available until later this year, our Milkminder matched sample data for March 2018 shows that the rolling milk price has increased by 4.98ppl during this period. This is significant and would mean that the average dairy farm in the sample would have generated an extra £83,789 of income in the past financial year, if the level of production remained the same as the previous year.”

Combined with the average Milkminder herd increasing yield per cow by 241 litres and increase herd size by five cows, these FBA farms would add a further £26,263 to their income if they replicate this increase in volume of milk produced.

Feed rates

Mr Davies adds, however, that it has not all been good news. “The Milkminder matched sample indicates that average concentrate prices have increased year-on-year by £16 per tonne. And this, as well as feed rates increasing by 0.01kg/litre up to March 2018, will have diluted margins by around £10,400.”

Farm overheads and other non-feed costs have also come under pressure during the 12 months to March 2018. “If the average Retail Price Index (RPI) is applied to these costs in the FBA sample, then an additional average cost of £10,771 can be added for the financial year.”