Back to Basics: Guidelines for Profitable Dairy Farming

1. Back to Basics:Guidelines for Profitable Dairy Farming Michael Verner25 January 2011

2. 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 Outline OUTLINE

3. Feed and fertiliser prices: 2000 - 2010 Feed and Fertiliser Prices - 2000-2010

4. The rising cost of production The Rising Cost Of Production

5. Does milk from forage matter? Does Milk From Forage matter

6. How we’ve changed How we’ve changed

7. The ‘real’ cost of forage The ‘real’ cost of forage

8. Definition: Net Profit (£/cow) Definition: Net Profit (£/cow) • Net profit = Output – (Variable costs + Overhead Costs)

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

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

11. How important is feed efficiency? How important is feed efficiency?

12. How we’ve changed How we’ve changed 0.32 kg/litre 0.21 kg/litre

13. Milk yieldversus meal fed fed 2.5tonnes 8000 litres 2.5tonnes 6200 litres

14. Example 100 cow herd selling 7,500 litres/cow from 2 tonnes of concentrates Buys 200 tonnes of dairy concentrate Sells 750000 litres of milk Farm has a feeding rate of: (200 x 1000kg) = 200000 = 0.26kg/litre 750000 750000 Measures that matter – Feed rate Measures that matter – Feed rate

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

16. 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) Feeding Method Feeding Methods

17. 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 Successful TMR feeding Successful TMR feeding

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

19. Are there economies of scale? Are there economies of scale?

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

21. Total profit from dairying Total profit from dairying 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 The prospects for 2011 and beyond

24. 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! The answers! The answers

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? 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”