Dairy farmers in Northern Ireland are encouraged by CAFRE advisers to monitor milk yields and concentrate feed rates on a monthly basis.
The milk cheque and meal bill are the two biggest contributing factors to the profitability equation on dairy farms. Data from CAFRE’s margin over concentrate (MOC) programme indicates that milk sales equate to £2,100/cow and concentrates cost £600/cow on average each year.
MOC is a benchmark that is relatively easily to calculate, as only figures relating to milk sales, cow numbers and concentrate usage are needed. It is defined as milk cheque minus meal bill and is a good indicator of feed efficiency on local dairy farms.
According to CAFRE analysis, there is also a relationship between MOC and net profit on dairy farms that conduct full financial benchmarking each year. In general, higher MOC per cow correlates to higher net profit per cow.
The sharp rise in other costs (not related to concentrates) in the highest milk yield band reflects that herds yielding over 9,000l have higher cost structures
However, this is a general trend and there is significant scope for outliers. This includes dairy farms that are feeding cows efficiently (high MOC) but have significant “other costs” that are not related to concentrates (low net profit). The average difference between MOC and net profit has been calculated for various yield bands. It is a difference of £770/cow for under 6,000l, £873 for 6,000 to 7,000l, £915 for 7,000 to 8,000l, £942 for 8,000 to 9,000l and £1,116 for over 9,000l.
The sharp rise in other costs (not related to concentrates) in the highest milk yield band reflects that herds yielding over 9,000l have higher cost structures, as they are more likely to have cows housed all year round and milk three times a day.
There is no substitute for working out your own farm’s overall cost base each year through full financial benchmarking, although the outlined figures for other costs can help give a rough estimate of net profitability for farms that only use the simpler MOC benchmark.
The latest figures from CAFRE also indicate that dairy farms in the 8,000l to 9,000l/cow yield band are currently achieving the highest net profit per cow at £628. This compares to a net profit of £538/cow in the over 9,000l band and £564/cow in the 7,000l to 8,000l band.
Dairy farms with yields between 6,000l and 7,000l had a net profit of £467/cow and the profit for the under 6,000l band was £403/cow.
This relationship between yields and net profit changes over time and the outlined figures hold up for the current milk price to concentrate cost ratio.
For example, if milk prices rose and meal prices eased back, net profit would be expected to increase in higher-yielding herds.
Factors affecting margin over concentrate
The latest figures from CAFRE indicate that the average MOC on NI dairy farms is £1,520/cow. Its analysis shows that milk yield per cow generally correlates with MOC per cow, but there is a variation across local farms.
For example, in an online presentation, CAFRE adviser Alan Hopps pointed out that MOC in herds that are averaging 8,000l ranges from £1,250/cow to £1,750/cow.
Feed efficiency, measured as milk from forage, is another key driver of MOC. Alan states that there is a trend in the current data which shows milk from forage positively correlates to MOC.
Calculating MOC on a monthly basis is recommended, as the benchmark is more up to date than waiting until the end of the year
However, this trend is even more pronounced if figures are adjusted to reflect a hypothetical drop in milk price and a rise in concentrate costs.
Calculating MOC on a monthly basis is recommended, as the benchmark is more up to date than waiting until the end of the year to do a full financial benchmarking exercise.
The online calculator for MOC, which is accessed through DAERA online services, also provides figures for milk from forage. This is useful for finding out the yield response from the ration being offered to cows.
It is often said that there are three different rations within any dairy farm – the one that the animal nutritionist formulates, the one that the dairy farmer thinks they are feeding and the one that cows are eating.
There are numerous reasons why milk from forage can be lower than expected. This includes forage quality being poorer than originally thought, overfeeding low-yielding cows and incorrect feeder settings.
Apart from efficient use of concentrates, the other side of MOC is milk price. While it is largely out of a farmer’s control, there are steps that can be taken to maximise payments per litre under the Northern Ireland pricing system, with the main one being bonuses for milk quality.
Sticking with a long-term breeding strategy to lift butterfat and protein levels will result in improved bonus payments. Alan Hopps gave the example of figures from two Holstein herds during May 2020.
Herd A yielded 28.5l; 15.4l came from grass and MOC was £6.32/cow/day.
Herd B had a higher yield of 32.3l, with 15.9l coming from grass, but MOC was only £4.94/cow/day.
The difference was due to milk price, even though they supplied the same processor. Herd A had a milk price of 27.4p/l, as butterfat was 4.21%, protein was 3.61%, somatic cell count was 114 and bactocount was 18.
Herd B had much lower milk quality – 3.30% butterfat, 3.30% protein, 330 somatic cell count and 39 bactocount – meaning its milk price for the month was only 21.6p/l.