Feed issues reduce benefit of higher milk price

Dairy margins have been held back by poor forage quality and increased purchased feed costs despite rising farmgate milk prices, according to the latest results from Promar’s Milkminder.

At 26.245p/litre, farmgate prices in the consultant’s sample were 1.12p/litre higher in November 2016 than they were a year earlier, but the margin per litre increased by just 0.7p because of higher feed costs.

Concentrate use was 2.3% up on the same period 12 months ago, to just over 47t for the average 200 cow herd in the sample. This reflected poor starch degradability in early crops of grass silage and maize.

See also: Global dairy production at three-year low

Total feed costs were £10,050, 4% higher than they were in the previous November, adding an extra cost of £364 to the sample on average.

A 3.8% increase in margin over purchase feed (MOPF) to 18.19p/litre on November 2015 was only facilitated by a slight increase in herd size, as the MOPF per cow was unchanged at £113 for the month.

Serious impact

The milk price to feed price ratio (MFPR) sat at 1.26, compared to 1.23 a year earlier, highlighting that higher feed prices were seriously impacting producers’ ability to rebuild margins.

MFPR provides a partial cost of production picture, based on average milk prices and the cost of intensive energy animal feed.

However, the Promar figure is 23.5% above the UK national MFPR average of 1.02, a reflection of how the figure varies depending on the type of contracts and feed used.

“An MFPR of 1 is not a fantastic result, but it’s a steady improvement on the 0.9 seen last summer,” said senior AHDB dairy analyst, Luke Crossman.

“There’s certainly lots of improvements to be made across the board, but these will be helped if high milk prices can be sustained.”

He added: “Feed prices rose by about 8% between June and December last year, largely neutralising the effect of higher farmgate returns on MFPR.”

Promar warned that milk ‘bought’ using concentrates would be marginally economic at best.

AHDB Dairy now publish monthly UK MFPR figures here