Milk prices still below production costs for many producers

Many UK dairy farmers are still operating at a loss as total production costs remain above farmgate milk prices, according to a report by consultancy firm Kingshay.

Analysis of more than 1,000 dairy herds in the company’s annual Dairy Costings Focus report found that milk prices averaged 38.2p/litre for the 12 months to 31 March 2024, 17% lower than the previous year.

Kathryn Rowland, senior farm services manager at Kingshay, said prices had come up slightly since hitting the bottom of the market in July last year, but not by a great deal.

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“It’s lower than the cost of production for many producers, so its something that is making challenges on farm in terms of profitability.”

Herd size increased marginally to average 219 cows. Average milk yields remained in line with last year at 8,441 litres a cow, while milk from forage was down by 3% at 2,691 litres/cow.

Ms Rowland said: “As a result many herds were feeding more concentrates to try and keep milk yields up at a similar level.”

Lower annual concentrate costs of £339/t and total purchased feed costs of 12p/litre helped to offset some of this.

The milk to feed price ratio was at its lowest level for more than 20 years at 1.13, putting it in the contraction zone.

Production systems

Block calving herds with a housing focus came out on top based on margin over purchased feed.

However, spring calving herds and block-calving herds with a grazing focus came out highest on a margin-per-litre basis.

Ms Rowland said: “Each system is profitable, it just depends where you are within that and whether you are in the top 25%.”

The margin over purchased feed per cow for year-round calving herds with a housing focus averaged £3,062 a cow for the top 25% of producers, while the bottom 25% averaged just £1,958 a cow. This equates to a difference of £220,000 a year for a 200-cow herd.

Regional analysis

Overall, there were similar trends for herd size and milk yields across the UK.

However, Ms Rowland said herds in the south had the highest margin a cow on average, whereas on a p/litre basis the South East came out higher.

“In Scotland, herds actually improved their milk from forage,” she added.

Richard Simpson, development director at Kingshay, added that a higher proportion of herds in Scotland tend to be more housing focused, which is why the challenging summer and autumn last year didn’t quite affect them as much as the grazing focused herds.