1. Back to Basics: Guidelines for Profitable Dairy Farming
Michael Verner 25 January 2011

2. Does milk from forage matter? How important is feed efficiency?
Outline
OUTLINE
Where we are today
Does milk from forage matter?
How important is feed efficiency?
Are there economies of scale?
The prospects for 2011 and beyond

3. Feed and Fertiliser Prices - 2000-2010

4. The rising cost of production

5. Does milk from forage matter?

6. How we’ve changed 2000 2010 Change Herd size 83 129 +46 Milk yield
(litres/cow)
6000
6710
+710
MFF
3222
1887
-1335

7. The ‘real’ cost of forage
Feed
Cash cost
(£/t utilisable DM)
Full economic cost
Grazed grass
44 (35 – 56) 80
3 cut silage
76 (69 – 109)
122
Wholecrop wheat 74
123
Forage maize
77 (72 – 162)
121
Concentrates
250
254

8. Definition: Net Profit (£/cow)
Net profit = Output – (Variable costs + Overhead Costs)
Variable costs
Overhead costs
Forage
Concentrates
Vet and Med AI
Miscellaneous
Machinery running costs
Contractor costs
Depreciation
Property repairs
Business costs
Labour
Conacre
Finance / Interest

9. Milk from forage and net profit2% 2% 4%
11%
22%
21%
38%

10. Does milk from forage matter?
“The man with money and grass will not waste the grass”

11. How important is feed efficiency?

12. How we’ve changed 2000 2010 Change Herd size 83 129 +46 Milk yield
(litres/cow)
6000
6710
+710
Meal fed
(kg/cow)
1250
2170
+920
0.32 kg/litre
0.21 kg/litre

13. Milk yield versus meal fed fed
2.5 tonnes
8000 litres
2.5 tonnes
6200 litres

14. Measures that matter – Feed rate
Example
100 cow herd selling 7,500 litres/cow from 2 tonnes of concentrates
Buys 200 tonnes of dairy concentrate
Sells litres of milk
Farm has a feeding rate of:
(200 x 1000kg) = = kg/litre

15. The link between feed rate and profit8% 8%
17%
28%
28% 8% 3%
Example farm = 0.26kg/litre

16. Herds fed concentrates; In parlour £300/cow net profit
Feeding Method
Feeding Methods
Herds fed concentrates;
In parlour £300/cow net profit
In OOPF £280/cow net profit
Via TMR £180/cow net profit
(range: loss of £300 to profit of £600)

17. Successful TMR feeding
Feeding quality forage(s)
Batching cows
Feeding to the lowest yielding cow in group and ‘topping up’
Moving cows as yield declines and adjusting parlour feeding
Calibrating parlour feeders
Checking crude protein of ration esp. with inclusion of maize
Staff understanding

18. How important is feed efficiency?
“Margin is sanity, volume is vanity”

19. Are there economies of scale?

20. Total profit from dairying
100 cows
170 cows 8%
15%
19%
25%
20%
13%
Herd size

21. Total profit from dairying
Controlled expansion maintain performance
Little expansion regain performance
Herd size

22. Are there economies of scale?
“Get better before you get bigger”

23. The prospects for 2011 and beyond

24. Does milk from forage matter?
The answers!
The answers
Does milk from forage matter?
Yes - High quality grazed grass and grass silage are vital to ensure future profitability
How important is feed efficiency?
Very – Concentrates are the single biggest cost on most dairy farms
Are there economies of scale?
Probably – but make sure performance is good and then expand gradually, remember profit equals margin x volume!

25. What are the prospects?
What are the prospects?
Good prospects for milk prices despite volatility
Input costs will remain high or further increase
Quality forage has an essential role to play in maintaining our competitiveness
The top 50% of Northern Ireland dairy farmers have a profitable and sustainable future

26. Benchmarking- what’s it all about?
Do you know what level of profit your business is making?
Do you know how each category of your costs compares to other farmers in Northern Ireland?
Do you know what are realistic physical and financial performance targets for your dairy system?
Benchmarking – “Measure to Manage”