Farm Profit Programme: positives to be taken from year two results
This week we report the year two results of the Farm Profit Programme from Mackay’s at Greenvale and the Duffus’ at Mains of Auchriachan.

Over the next three weeks, we will report the year two gross margin results from the programme focus farms. There is no doubt that this period, from November 2017 to the end of October 2018, was climatically challenging for all livestock producers, and this is clearly reflected in the results.

As well as this, the focus farms continue to expand and invest in breeding stock numbers which has also had an effect on gross margin.

The Mackay family

Spring herd

Overall, we are pleased with the progress we are making in the programme. However, the spring herd gross margin is back £95/head compared to last year. This can be explained by looking at the replacement rate of the herd increasing from 16% in 2017 to 25% in 2018, or an increased replacement cost/cow of £148 year on year. This is due to purchasing more breeding stock last year as we try to build cow numbers once again.

We are now carrying more cows per acre and therefore can increase the stocking rate on farm. We expect to see this replacement rate to drop again to 15%-18% in the coming years as cow numbers stabilise. This will then be reflected in the gross margin.

Summer herd

The summer herd has kicked on once again, increasing from £618/cow to £733/cow, an increase of £115/cow. As cow numbers in this herd are more stable, there was no great increase in replacement costs in this herd.

At £733/cow, we are just short of the overall programme target of a £750/cow gross margin. We feel there is still room for further improvement and hopefully in the following couple of years we can achieve and even surpass this target.

The major difference between the two herds is that the summer herd is outwintered on a sandy hill. This cuts out all the bedding costs as well as some feed costs as we defer grazing for these cows in the back end of the year.

Grazing improvements

Major improvements have been made in the daily liveweight gains (DLWG) from birth to weaning across both herds. A lot of this has been achieved by better grazing management throughout the season, with rotational grazing having a massive effect on cow milk yield, which is really pushing the liveweight gain of the calves throughout summer. Improving the silage quality has also helped liveweight gains in the growing stock in the first winter, giving us a slightly increased sale weight at a cheaper cost/kg liveweight.

Plan for 2019

More of the same. We’re happy we are on the right track. We are increasing the number of paddocks on the farm to give us more control over the grazing.

When you look at the figures, the temptation is to push summer cow numbers. However, there is only so much ground on the farm that is suitable for outwintering. We feel we have the balance just about right for the farm at the moment. If there is to be a further increase in numbers we will need to consider additional housing.

The Duffus family

The spring-calving cows are back by £153 on the baseline and £269 on last year, while our autumn-calving cows are up by £89 on the baseline and £9 on last year. The sheep are also back by £25 on the baseline and £13 on last year.

Spring cows

The drop in the spring cows has come from two things – a poor weaning rate and high feed costs for last winter. Weaning rate for this year came in at 73%, down from 90% in the baseline year. This was caused by a bull not performing. He had been vet-checked and all showed well, and he had also been seen serving cows. Unfortunately, he had low libido and failed to cover all of his cows.

This has resulted in the output per cow to the bull being £166 lower than the previous two years.

Coupling this with an increase in feed and bedding cost for last winter of £38 over the benchmark year and £108 over year one, it makes for some tough reading for the spring cows.

Autumn cows

The autumn cows provide a ray of sunshine, with an £89/ cow rise over the baseline and a £9/cow rise over year one.

Again, feed and bedding costs have affected these results, with a £70 rise on the baseline year and a £150/cow rise on the year one results. However, a rise in weaning rate and a better sale price have more than offset this to leave a positive result.

Sheep

The sheep gross margin reduction has been driven by the same two things – weaning rate and feed costs. While we managed to wean the ewes early and in good condition, winter 2017/2018 was very hard on the sheep. We started feeding the ewes in early December right through until the middle of May, when grass growth finally kicked in. This led to feed and bedding costs increasing by £6/ewe over the baseline and nearly £8/ewe over the year one result.

Despite the relatively high feed rate last year, it only managed to keep ewes standing still and as a result, our scanning was back by nearly 30%. Overall, we had an output per ewe that was £18 less than the baseline year and £2 less than year one.

Plan for 2019

Looking forward, we have taken several decisions that will help to reduce the impact of these changes. Firstly, with the cattle, we have been trialling woodchip as a bedding material. This has will help to reduce the straw costs for bedding. Secondly, while the season has helped, we aim to make more use of outwintering. This coming winter, we are going to have a greater area of forage crops established and the plan is for the spring cows to graze them off before they are housed. This should save straw and silage.

The bull that caused the problems has now left the herd. However, he did cover the 2018 bulling season before his faults were found. This will mean a lower weaning rate for next year too. Going forward though, we are keeping a closer eye on bull performance and have been noting cows bulling and whether there are repeats.

Sheep-wise we are looking at improving lamb value and at driving scanning rates. We aim to raise lamb value by finishing more of them ourselves, with the plan to use mainly forage crops to drive their growth. As far as scanning rates go, we are weaning the lambs a lot earlier than we would have in the past to give the ewes the maximum opportunity to build condition pre-tupping.

We are also looking at weaning the autumn calves earlier in the season to allow us to send the cows out to the hill and take pressure off the in-bye grassland. This would allow us to establish more forage crop to keep ewes through winter.

Price cuts and oversupply hit milk sector
Graham’s The Family Dairy was with a 10% increase in milk supply; and First Milk cut price paid in June.

Falling prices and increased volumes are challenging the dairy sector. First Milk has cut its price to producers due to “downward pressure on dairy markets”, and UK production has been hitting a 20-year high every month this year. Meanwhile, Graham’s The Family Dairy has struggled to cope.

“Our milk production was up by 10% this year, compared with last year. This is a real challenge for us as an independent family dairy business, as milk volumes must be in line with our customers’ needs,” said Robert Graham, managing director.

“We are having positive conversations with our dairy partners and colleagues to address these ongoing challenges, working together on the best way to understand what the milk supply needs to be, and deliver on it.”

As processing capacity is outstripped by supply, excess milk will be put on the market, having a downward effect on prices. Average UK price is 29p/l, slightly above the five-year average of 27.5p/l.

The UK milk future projections are also indicating an encouraging upward trend

First Milk has announced that its price will reduce by 0.3p/l from 1 June to 27.45p/l for liquid milk and 28.37p/l for manufacturing milk.

Jim Baird, First Milk vice-chair and farmer director, said: “Unfortunately, we now need to make this adjustment in light of the downward pressure on UK dairy markets. Looking forward, global dairy markets are looking more positive and, with peak largely behind us, the UK milk future projections are also indicating an encouraging upward trend.”

Market for dairy calves

Finding a market for male dairy calves was the subject of conversation at the Exiles dairy discussion group meeting in Dumfries last Tuesday.

Up until now, the only real market for these low beef-merit Holstein Friesian and Jersey-cross calves was for pet food production

The discussion group – primarily made up of spring-calving, grass-based dairy farmers in southwest Scotland and northwest England, are trying to find alternatives to slaughter for male dairy-bred calves.

Up until now, the only real market for these low beef-merit Holstein Friesian and Jersey-cross calves was for pet food production. But milk buyers, responding to concerns from the public, are beginning to enforce rules around minimum age for slaughter.

The dairy farmers say that finding an alternative market for these calves is difficult and that an industry-wide initiative needs to be put in place to reduce the number of low beef-merit calves, but also to find a market for beef calves from the dairy herd.

One farmer said it cost him £12/head to transport three-week-old Hereford-cross calves from his dairy herd near Dumfries to a market at Carlisle, only for the calves to make an average of £28 in the ring – below the cost of feed and transport.

Scottish beef and lamb markets experience a dip in price
Farmers Journal Scotland editor John Sleigh has his take on the week's lamb and beef sectors.

Cattle prices slipped a little this week as abattoirs took advantage of decent supply, with prices paid closer to £3.60/kg compared with £3.65/kg last week for an R4L steer.

The official AHDB reported price dropped 1p/kg to £3.67/kg for an R4L steer.

This maintained a premium over the northern English price of 9p/kg for the same grade cattle.

Heifers are reported by the AHDB as a good trade at £3.70/kg for an R4L.

Deadweight cow prices rose 5p/kg to £2.73/kg for an O-4L carcase, which is 8p/kg more than northern England.

Lamb market

The live market for lambs tumbled by 19p/kg to £1.88/kg for medium-weight lambs.

Heavier lambs also fell by 18p/kg to £1.76/kg live weight.

Numbers of old-season lambs sold through the live ring fell back again as the season is drawing to a close, with 1,300 fewer lambs sold, with 8,941 head through the live ring.

Meanwhile, 5,211 store lambs were sold through Scottish marts, with a big sale at United Auctions.

The AHDB is reporting a UK price of £5.04/kg for an R3L carcase, with a kill of over 16,000, which is up 7,000/head.

Numbers of new-season lambs sold through the live ring rose again by 700 head to 1,565 lambs.

Ayr, Lanark, St Boswells, UA Stirling and Thainstone marts sold over 100 new lambs each.

The average price for medium-weight lambs was £2.28/kg liveweight. Cast ewes through the ring fell nearly 1,000 head on the week to 2,668 head, as the average price dropped £5/head to £63/head.

Beef wobble worry
Farmers Journal Scotland editor John Sleigh has his take on the week's big news.

It’s worrying that a few abattoirs cut their beef price this week to just over £3.60/kg for an R4L steer. It would seem increased beef supply and weak consumption are allowing processors to claw the price back a couple pence.

Retail sales have been struggling, sliding by around 4% on the year

After a sharp fall in supply from mid-March to April, we have seen a recovery in the last three weeks. While our beef kill is unchanged on the year, when you factor in a higher average carcase weight there is 0.6% more volume on the market.

Meanwhile, retail sales have been struggling, sliding by around 4% on the year, with roasts taking a significant hit.

The good news is the current supply peak usually finishes just after the Highland Show, and barbecue season should kick in soon, helping to increase consumer demand.

No cars at future shows

Having no cars at the Highland Show was one of the recommendations by a transport expert to chief executive officer Alan Laidlaw.

Alan found it hard to imagine how thousands of farmers could descend on Ingliston without using motor vehicles.

But future planners are serious about the combustion engine’s demise, and felt that not much parking will be needed for the double centenary year in 2040.

If this comes to bare, then we better widen doors on the trains from Mallaig if we want a Highland cattle class.