Dairy performance results 2018/19...2 Contents 3 Foreword 4 Glossary 6 Dairy performance results...

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Dairy performance results 2018/19

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Contents

3 Foreword

4 Glossary

6 Dairy performance results 2018/19 at a glance Overview About the results

8 Aiming for excellence Optimal Dairy Systems Strategic Dairy Farms

10 Changes in milk production costs over time Overview Reasons behind the rise in costs Aboutthefigures

11 All-year-round calving herds’ performance 2018/19 Overview Technicalandfinancialperformance Aboutthefigures All-year-roundcalvingKPIinfocus:fulleconomiccostofproduction

16 Autumn block-calving herds’ performance 2018/19 Overview Technicalandfinancialperformance Aboutthefigures Autumnblock-calvingKPIinfocus:overheads(excludingrentandfinance)

21 Spring block-calving herds’ performance 2018/19 Overview Technicalandfinancialperformance Aboutthefigures Springblock-calvingKPIinfocus:milksolidsoutputperhectare

26 Exploringtheworld’smostprofitablefarms Overview Learningmorefromthetopperformers Aboutthefigures

30 Appendices Appendix1–Methodologybehindthedata Appendix2–Calculating£/kgofmilksolids Appendix3–Depreciation Appendix4–Unpaidlabour Appendix5–All-year-roundcalvingherds’performance2018/19 in£percowand£perhectare Appendix6–Autumnblock-calvingherds’performance2018/19 in£percowand£perhectare Appendix7–Springblock-calvingherds’performance2018/19 in£percowand£perhectare

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Foreword

Dairy performance results 2018/19Agriculturefacessomeinterestingtimesandrealchallenges.WenowfindourselvesoutsidetheEU,withnoidea–asyet–whatthefinalpicturewilllooklikeoncethePrimeMinisterandhisgovernmenthaveconcludedtheirdealingswithEuropeandinternationaltradeagreementswithothercountries.Whiletherewillbeopportunitiesandlittletofearforthebestperformers,themajority offarmerswillneedtoraisetheirgames,lookattheirbusinessesandthinkaboutwheretheywanttobein5or10years’timeanddairyisnodifferent.Everydairyfarmmustlookverycarefullyatallaspectsofthebusiness:output,costs,overheads,labour,futureinvestmentandespeciallytheenvironment,wheretherewillundoubtedlybegreaterpressure.Farmingasalifestylewillnotbetherightattitudeforsuccess,butthesuccessfulwillhavechoicesaboutlifestyle.Theaimshouldbehealthyprofits,leadingtoresilience,competitivenessandopportunitiesforthenextgenerationtoinheritagoodbusinesswithawork/lifebalance.Thosewhomightstruggletodothis,orwhofindthechallengedaunting,mightfinditabetteralternativetotakeinayoungpersonorayoungcoupleasshare-farmingpartners– thisapproachishugelyunderutilisedandoftenhasaverysuccessfuloutcome.IntheAHDBOptimalSystemsprogramme,wesimplydividetheindustryintoall-year-round(AYR)calvingherdsorblock-calvingherds,whetherspring,autumnoranyothertimeofyear(providingthetightcriteriaaremet).Wehaveshownthatthebestfarmersmakemoneyregardlessofthesystemtheyuse;thisreportshedslightonhowtheyachieve thatsuccess.Unsurprisingly,thebestfarmersinallsystemsproducemoremilkfromallfeedandforage(efficiencyandproductivity),buttheyalsohavelowercosts.Thereisnodoubtthatotherfarmshaveatleastthesamelevelofoutput,butthatisoftennegatedbyveryhighmachinery,labourandpowercosts.Asacountryblessedwithsuchincrediblegrowingconditions(despitesomeextremeweatheroflate),wedonotgroworutiliseanywherenearpotentialwhenitcomestomilkfromforageandgrazedgrass.IfwelookatNewZealandandIrelandfortheextensivecomparison,orattheNetherlandsforintensivecomparison,weseethatfewofourowndairyfarmsachievesimilarperformance.IntheUK,manyfarmershavemadethemovetospringblockcalving–andwithgoodresults.Thissuccessismainlyduetotheenthusiasmanddeterminationofthosefarmers tomakethingsworkandtheirnaturalinclinationtobenchmarkandimproveallaspectsoftheirbusiness.Autumnblockcalving,ontheotherhand,stillremainsoneoftheindustry’sbest-keptsecrets-manyAYRdairyfarmsshouldlookatthisveryseriouslyandconsider achangeofsystem.Unfortunately,wehaveaverysmallamountofgenuineandproperblock-calvingdata,whichisahandicap.AYRontheotherhandisbyfarthelargestsector,withahugerange inperformanceandherdsize.Therearesomeamazingfarmerswithinthissector,butthis isalsowherewefindmostofthepoorerperformers,regardlessofherdsize.Iworryaboutthefutureviabilityofthosewhoarestrugglingtodaybecauseitislikely thatotherpressureswillmaterialiseoverthecomingdecade,evenifthemilkpricedoesimprove.Therefore,actionisneedednow.Thefiguresinthisreportrevealhowsmalldifferencesineveryheadingaddup,withthebottomlineshowingeitherprofitorloss, giventhemilkprice.PleasedovisitourAHDBStrategicFarmsandseehowthebestfarmersdoit.Ifyou areoperatinganAYRsystemandyouarestruggling,lookatourautumnblockfarmsandconsidermakingthatchange.Itoffersasimplersystem,whichconcentratesondoingonethingatatime(calving,AI,dryingoff),withourkeyperformanceindicatorstomeasure upagainst,andcanofferabetterlifestyletoboot.Shouldweacceptfixedcosts?Howmanyaretrulyfixed:figuresthatonecandolittleabout,suchasratesand–insomeareas–perhapswaterandrent.Allothercosts,

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Iwouldargue,arechangeablebecausefarmerscanalterthematwilliftheyaredeterminedtodoso.Materialhandlingisaclassiccaseofcostsandactivitywith–inmostcases– noaddedvalue.Therearethecostsoffeedforthecow(littledifferenceotherthanoutputfromthatfeed)andthentherearethecostsoffeedingthecow(hugedifferenceshere).Canweaffordtocarryonregardless?Aresomedairyfarmersmoreattachedtothemachinesthantheyaretothecows?Thesamegoesforyoungstock:veryoftenthereistoogreatacostandnotenoughgrowth.Thesedays,alldairyheifersshouldcalveat24monthsofage,withnoexception.Internationalcomparisonsareinteresting,butmoredifficult.However,thereisone commondenominatoracrosstheboard:theverybestdon’tdoanythingradicallydifferent.Theyjustmakesuretheyfocusontheprioritiesandtheydothebasicstoaveryhighstandard.It’snoteasy,butitiscertainlyisnotcomplicated.

Gwyn Jones AHDBBoardMember andDairySectorChair

GlossaryAverage daily lifetime yield–totalmilkproductionofcowsthatlefttheherdduring theyear,averagedovertheirlifespanBuildings depreciation–imputeddepreciationondairy-specificbuildingsCash cost of production–includesalllivestockpurchases,variablecostsandcashoverheadcosts(paidlabour,powerandmachinery,propertyrepairs,rent,financeandotheroperationalcosts).Excludesimputedcostofunpaidlabour,machineryandbuildingsdepreciationandimputedrentalvalueofownedlandCash net margin–cashoutput(excludingdairyandyoungstockherdvaluationchanges)minuscashcostofproductionDairy herd valuation change–closingvaluationofthedairyherd,minusopeningvaluationofthedairyherd.Thisreflectsachangeinlivestocknumbersonly,becausefluctuationsinmarketvaluethroughouttheyeararenotaccountedforFeed and forage cost –actualcostofallpurchasedfeedandforage,plusmarket valueofallhome-grownnon-foragefeedandvariablecostofhome-grownforageForage–grasssilage,hay,non-grassforageandstraw(bothpurchasedand home-grown)Full economic cost of production–includesalllivestockpurchases,variablecostsandoverheadcosts.Includesimputedcostofunpaidlabour,machineryandbuildingsdepreciationandimputedrentalvalueofownedlandFull economic net margin–totaloutputminusfulleconomiccostofproductionHerd replacement cost –thenumberofdairycowsleavingtheherd(calculatedusingtheherdreplacementrate),multipliedbytheaveragevalueofincomingcowsandheifers,minusthevalueofcowsremovedfromtheherdHerd replacement rate–thenumberofcowsthathavelefttheherdthroughouttheyear,asaproportionoftheherdsizeIFCN–InternationalFarmComparisonNetwork,basedinGermanyKey performance indicators (KPIs)–theKPIsreferredtointhisreportarefromourOptimalDairySystemsprogramme,whichhighlightstheareascrucialfordeliveringfinancialperformanceinall-year-roundandblock-calvingsystemsLabour cost –actualcostofpaidlabour,plusimputedcostforunpaidlabour

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Machinery and equipment depreciation–imputeddepreciationondairy-specific andforagemachineryandequipmentMilk solids–butterfatandproteincontentofmilkMilk yield–calculatedfromthetotalamountofmilkproducedintheyear,divided byeithertheherdsizetoobtaintheaverageyieldpercowperyear,orbytotalareaallocated to the dairy herd to obtain the average yield per hectare per yearNon-forage feeds–purchasedcompoundfeed,cereals,proteinfeedsand by-products,plushome-growncereals,proteinfeedsandby-productsOther livestock costs–includeartificialinseminationandbreedingcosts,beddingcostsanddairy,parlourandyoungstocksundriesOther operational costs–includewaterandtelephonecharges,generalinsurances,professionalfeesandotheroffice-relatedcostsOutput–includesthevalueofmilkproduced,calvessold,cowssold,youngstockheiferssold,otherincome(e.g.slurrytoarableland),dairyherdvaluationchangeandyoungstock valuation changeOutput/input ratio –calculatedbydividingtotaloutputbyfulleconomiccost ofproductionOverheads (excluding rent and finance)–overheadsofthedairyandyoungstockherd,includingimputedcostofunpaidlabourandmachineryandbuildingsdepreciation,butexcludingrentandfinancePower and machinery cost–includesrepairsandspares,machineryhire,contracting,fuel,electricityandvehicletaxandinsuranceRental value of owned land –imputedrentalvalueofthehectaresofownedlandusedforthedairyandyoungstockherd(grasslandandforageareas)Youngstock herd valuation change–closingvaluationoftheyoungstockherd,minusopeningvaluationoftheyoungstockherd.Thisreflectsachangeinlivestocknumbersonly,becausefluctuationsinmarketvaluethroughouttheyeararenotaccountedfor

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Dairy performance results 2018/19 at a glanceWhat would you like your business to deliver? Whatever your aim, it is vital to have a net margin that supports those plans now – and in the future. Comparing your farm to similar businesses in this guide helps you find areas where you can make the biggest improvements and increase your control over your net margin.

Overview

Other findings ● Theincreaseincostsin2018/19wasmainlyassociatedwithhigherfeedand forage,labour and fuel costs

● Spring block-calving herdshadaparticularlysharpriseinfeedandforagecosts in2018/19,causedbythedroughtconditionsduringsummer2018

● Inthepreviousyear,thetop25%andmiddle50%acrossallthreecalvingsystemswere able to make a positive net margin

● Themainareasofcostinwhichthetopfarmsperformedbetterwere:- Feedandforage–forAYRandautumncalvers- Labour–acrossallthreecalvingsystems- Machineryandpower–acrossallthreecalvingsystems- Buildings and rent–forspringcalvers

● AreasinwhichtypicalUKfarmsdidnotperformwellcomparedwithsomeoftheircounterpartsabroad:- Makingthemostofavailableforage.Youcangetthelatestadviceandresearch

ongrass,forageandsoilmanagementfromourGrass resources- Controllingmachinerycosts.UseourMachinery cost calculator to work out the

costofrunningamachineagainstthecostofacontractor- Managingstockingratesandgrassutilisationforefficientoutput per hectare

offoragearea.Compareyourperformancefigurestothetop25%foryour system–AYR(page 11),autumnblock(page16)orspringblockcalving(page 21)

Table 1. Full economic net margin in pence per litre for all-year-round, autumn and spring block-calving conventional GB dairy herds in 2018/19, when ranked by output/input ratio

Pence per litre All-year-round Autumn block Spring block

Top25% 4.8 9.7 10.3

Middle50% –0.9 3.7 4.9

Bottom25% –8.0 –2.1 –4.4

Source:AHDB,PromarInternationalandpartners

Key highlights ● GBaveragemilkproductioncostsincreasedbyaround1.6penceperlitre(ppl)(5%)in2018/19comparedwiththeyearbefore

● The top25%madeapositivenetmarginin2018/19,whethertheywere all-year-round(AYR),autumnorspringblockcalving(Tables1and3)

● The top25%hadconsiderablylowerproductioncosts,whethertheywere AYR,autumnorspringblockcalving(Tables 2 and4)

http://ahdb.org.uk/knowledge-library/grass

http://ahdb.org.uk/machinery-costs

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Table 2. Full economic cost of production in pence per litre for all-year-round, autumn and spring block-calving conventional GB dairy herds in 2018/19, when ranked by output/input ratio

Pence per litre All-year-round Autumn block Spring block

Top25% 29.2 25.2 27.8

Middle50% 34.0 31.4 31.4

Bottom25% 39.1 35.3 39.7


Table 3. Full economic net margin in £ per cow for all-year-round, autumn and spring block-calving conventional GB dairy herds in 2018/19, when ranked by output/input ratio

£ per cow All-year-round Autumn block Spring block

Top25% 436 720 588

Middle50% –74 286 262

Bottom25% –601 –171 –211


Table 4. Full economic cost of production in £ per cow for all-year-round, autumn and spring block-calving conventional GB dairy herds in 2018/19, when ranked by output/input ratio

£ per cow All-year-round Autumn block Spring block

Top25% 2,626 1,869 1,591

Middle50% 2,945 2,413 1,687

Bottom25% 2,919 2,941 1,894


About the results

Using the results ● TheDairyperformanceresultsprovidecostsandmarginsfromGBdairyherdsacrossthetwooptimalsystems–all-year-round(AYR) and block calving–withblocksshowninbothautumnandspringblocks.Thisallowsyoutocompareyourownfigurestofarmsoperatingthesamecalvingsystem

● Ifyouareusingthesefigurestohelpmakeadecisionaboutswitchingyourcalvingsystem,itisworthbearinginmind:- Howthesystemfitswithyourmindset,yourmilkbuyer’srequirements and the

resourcesavailableonyourfarm.FormoreinformationvisitourOptimal Dairy Systems webpage

- The costofchangingsystem- The springcalvingdatashowlargerherdsizesthantheothersystems–average

herdsizeforthemiddle50%ofspringcalversisnearlydoublethatoftheAYRand autumn herds

- TheAYRcalvingsampleislargerthantheblocksamples–thespreadoffarms inGBmeanswecanreportdatafromalargersampleofAYRherdsthanblockcalvers,sothereislikelytobemuchmorevariationintheAYRresults than the block-calving results

http://ahdb.org.uk/optimal-dairy-systems


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Where the data comes from ● Thedatacomesfromtheannualaccountsof350GBdairyfarms,withfinancialyear-endsbetweenDecember2018andJune2019

● ThesampleoffarmsisdesignedtoberepresentativeofGBasawhole(formoreinformationpleasetakealookatAppendix1)

● Thefarmsarerankedbyoutput/inputratio,asameasureofproductivity,thengroupedintoquartilesofthetop25%,middle50%andbottom25%

● TheGBdataissourcedfromPromarInternationalandpartners ● Youngstockoutputandcostsareincluded,withtheexceptionofthetimeseriesshowninChangesinmilkproductioncostsovertime(page10).Thisisthefirst timewehavebeenabletoincludefullyoungstockcosts,sopleasenotethe figuresshownforeachsystemarenotdirectlycomparablewithpreviousyears’results.Thetimeseriesonpage10showsfiguresforthedairyherdonly, excludingyoungstock,toallowcomparisonswiththedatawehaveavailable frompreviousyears

● Decoupledsubsidies(e.g.theBasicPaymentScheme)areexcluded.InExploringtheworld’smostprofitablefarms(page26),somefarmsabroadalsoreceivedcoupled subsidies and these are included

● TheinternationaldatainExploringtheworld’smostprofitablefarms(page26)arefromtheInternationalFarmComparisonNetwork(IFCN).Thefiguresinthissectionarefromthe2018calendaryear

Ifyouwouldlikemoreinformationaboutthedata,pleasetakealookattheAppendices atthebackofthisreport.

Aiming for excellenceWorking out how you get your business to deliver what you want can be challenging, but can prove time well spent. Our Optimal Dairy Systems programme is designed to help you prioritise the areas to focus on. Visiting our Strategic Dairy Farms can help you come up with ideas about how to move forward in those areas.

Optimal Dairy SystemsThedairyindustryusesover70performancemeasures,soitcanbedifficulttoprioritisethekeyareaswhentryingtomakeimprovements.AspartofourOptimal Dairy Systems work,wehaveconsultedwithindustryexpertstosimplifythisandhaveidentifiedasmallnumberofoperationalkeyperformanceindicators(KPIs)foreachcalvingsystem(Tables5 and6),aswellasbusiness measures that apply to all systems (Table7).FormoreinformationontheseKPIs,takealookattheindividualsectionsonAYR,autumn-andspring-calvingherds.Youcanalsoworkoutandcompareyourownfarm’sKPI results using our KPI calculator.

Table 5. Operational KPIs for all-year-round calving herds

KPI Excellent performance

Good performance

Average performance

Pregnancyrate(%) >25 20 14

Ageatfirstcalving(months) 23(butnotlessthan22) 24 27.5

Total purchased feedcosts(ppl)

8,000L 7.0 7.5 8.010,000L 7.8 8.5 9.012,000L 8.0 8.5 9.5

Averagedailylifetimeyield(L/day) >19.0 14.5 12.5

Overheads(excludingrentandfinance)(ppl) 9.0 10.0 12.5

Geneticmerit(percentile) 5th 25th 50th



http://ahdb.org.uk/optimal-dairy-systems-benchmarking-calculator

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Table 6. Operational key performance indicators for block-calving herds

KPI Excellent performance

Good performance

Average performance

Cowsandheiferscalvedwithinthefirst6weeks(%) >90 80 70

Herdreplacementrate(%) <20 22 26

Milksolidsoutputperhectare(kg/ha) >1,500 1,250 1,100

Milkyieldfromforage(L)and(solids,kg) >5,000(427kg) 4,000(432kg) 2,750(235kg)

Overheads(excludingrentandfinance)(ppl) 9.0 10.5 12.5

Geneticmerit(percentile) 5th 25th 50th

Table 7. Business measures for all dairy herds, including costs and revenue from their replacement youngstock enterprises

Business measure Excellent performance

Good performance

Average performance

Full economic net margin(ppl) 7.0 2.0 –3.0

Returnontenants’capital(%) >20 14 3

Full economic costs ofproduction(ppl)

AYR<27.5 Block<24.0 30.0 34.5

These KPIs and business measures undergo periodic review to ensure they stayrelevant.ToseethecurrentKPIdefinitionsinmoredetail,pleasevisit ahdb.org.uk/optimal-dairy-systems

Strategic Dairy FarmsOurnetworkofGB-wideStrategicDairyFarmshelpsfarmerstolearnfromeachother.Throughregularon-farmmeetings,wesharetheirkeyperformancedataandshowcasethemethodsusedbythebestperformingfarmers.ThesefarmsformpartoftheOptimalDairySystemsprogramme,whichaimstohelpdairyfarmerslowercostsandincreaseefficiencybyfocusingoneitherablockorAYRcalvingsystem.ThegrowingnetworkofStrategicDairyFarmshascalculatedKPIsfortheirenterprises,whicharesharedatmeetingsandpublishedonline.Thesearephysicalandfinancialperformancemeasuresthatarecriticaltosuccess.FarmerscanbenchmarktheirbusinessesagainsttheseKPIsandidentifyareasforimprovement.Thebestoperatorsoftenachievetheirresultsbydoingthesimpleandbasicthingsverywell–asdemonstratedbyourStrategicDairyFarms.FollowtheprogrammeandfindotherlocalStrategicDairyFarmsat ahdb.org.uk/farm-excellence Tofindameetingnearyou,pleasevisitahdb.org.uk/events

92% of farmers who attended a strategic farming meeting said the changes made would have a positive impact on costs, productivity or profitability.


http://ahdb.org.uk/farm-excellence

http://ahdb.org.uk/events

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Changes in milk production costs over timeTrends in milk production costs over time give an overview of what happened in 2018/19 and how it relates to other years.

Overview ● GBaveragemilkproductioncostsincreasedbyaround1.6ppl(5%)in2018/19comparedwiththeyearbefore

● Costswerearound31.1pplin2018/19,whichisthehighesttheyhavebeensince2014/15(Figure1)

● GBmilkpricesaveragedaround29.4pplin2018/19

Reasons behind the rise in costsThemainareasthatpushedupcostsin2018/19were:

● Purchased concentratesup11% ● Purchasedforageandbulkfeedsup65% ● Paid labourup5% ● Fuelup18%

The rise in purchased concentrate costs was partly associated with higherfeedprices,butthefullpicturevarieswithcalvingsystem.ForAYRandautumncalvers,theamountofconcentratesfedremainedsimilarordecreasedslightlycomparedwiththeyearbefore.However,spring-calvingherdsincreasedtheirconcentratefeeding in response tothedroughtinsummer2018,furtherpushinguptheirfeedcosts.Theextremelydry weather during the summer alsopusheduppurchasedforageandbulkfeedcosts.Farmsinsomeregionswereparticularlybadlyaffectedandresortedtobuyinginalternativeswhenhome-grownforagestocksranlow.Spring-calving herds hadthelargestincreaseinpurchasedforagecosts,risingby1.5ppl,onaverage,comparedwiththeyearbefore.Paidlabourcostsincreasedbecauseofariseinthenumberofhoursofpaidlabour beingusedpercow.Fuel costs went up in line with the rises in red diesel pricesin2018/19.

Figure 1. Average full economic cost of milk production for GB dairy herds (excluding youngstock costs) from a representative sample across all calving systemsSource:AHDB,PromarInternationalandpartners

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About the figures ● Thefiguresinthissectionareforthedairyherdonly,excludingyoungstock.Thisissowecanmakecomparisonswiththedatawehaveavailablefrompreviousyears

● Thedataisfromarepresentative sampleofGBdairyfarms,acrossallcalvingsystems ● Subsidiesareexcluded ● DataissourcedfromPromarInternationalandpartners

Ifyouwouldlikemoreinformationaboutthedata,pleasetakealookatAppendix1.

All-year-round calving herds’ performance 2018/19Dairy farms running all-year-round (AYR) calving systems can compare their figures with farms operating a similar system, to see where they are performing well and where they could make improvements. The financial performance figures include revenue and costs for the dairy herd and dairy youngstock being reared as replacements.

Overview ● ThenetmarginforthetopquarterofAYRcalvingherdswas4.8pplin2018/19 ● Averagecostsforthedairyherdincreasedbyaround3% compared with the yearbefore

● Thenetmarginforthetopquarterofherdswas5.7ppl higher than the middle performersand12.9pplmorethanthebottomquarterofherds

● Thetopfarmsspentlessacrossallcostareas.Themainareasinwhichtheyperformedbetterwere:- Feedandforage- Labour- Machineryandpower

● Lookingattechnicalperformance,thetopfarmsperformedparticularlywellon:- Fewer labour hours per cow per year- Highermilkyieldfromforage- Higheraveragedailylifetimeyield

Technical and financial performanceArangeoffarmsachievethetop25%performancebracket.ThetopquarterofAYRherdsincludes:

● Herdsizesfrom105–1,075cows ● Yieldsfrom3,600–13,600litrespercowperyear ● Fulleconomicnetmarginsfrom2.0–11.3ppl.

Keyperformanceindicators(KPIs)fromourOptimalDairySystemsworkareoutlinedinblueinTables8and9.Ifyouwouldliketoseefinancialperformanceonaper-coworper-hectarebasis,pleasetakealookatAppendix5.FarmersoperatingtheAYRsystemshouldvisitourStrategicFarmsandifyouareunabletogetclosetotheirlevelsofperformance,youshouldlookatwhetheranautumnblocksystemmightsuityouandyourfarmbetter.Whendonewell,thiscanoffersimplicity,tightKPIsandabetterlifestyle.

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Table 8. Technical performance of AYR calving conventional GB dairy herds in 2018/19, when ranked by output/input ratio

Top 25% Middle 50%

Herd

Averageherdsize 311 219

Dairystockingdensity(livestockunits/ha) 2.1 2.0

Labour–paidandunpaid(hours/cow/year) 31 38

Milk production

Milkproduction(L/cow/year) 8,749 8,396

Milksolidsproduction(kg/cow/year) 663 636

Averagebutterfat(%) 4.04 4.06

Averageprotein(%) 3.32 3.30

Milkfromforage(L/cow/year) 2,973 2,943

Calving

Ageatfirstcalving(months) 26.5 26.6

Calvinginterval(days) 400 399

Herd replacement

Herdreplacementrate(%) 28 30

Numberoflactations 3.9 3.7

Averagedailylifetimeyield(L/day) 14.3 13.7

Dairyherdreplacementcost(ppl) 2.5 2.9


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Table 9. Financial performance of AYR calving conventional GB dairy herds (including youngstock*) in 2018/19, when ranked by output/input ratio

Pence per litre £/kg milk solidsTop 25%

Middle 50%

Top 25%

Middle 50%

Output

Milksales 30.4 29.7 4.02 3.91

Calfsales 1.3 1.0 0.17 0.14

Cowsales 1.8 2.3 0.23 0.30

Youngstockheifersales 0.2 0.2 0.02 0.03

Other income 0.0 0.0 0.00 0.00

Dairy herd valuation change 0.2 –0.1 0.03 –0.01

Youngstockherdvaluationchange 0.2 0.1 0.02 0.01

Total output 34.0 33.1 4.49 4.37

Livestock purchases 0.5 0.9 0.07 0.12

Variable costs

Purchasedconcentratesfordairyherd 8.1 8.4 1.07 1.11

Purchasedconcentratesforyoungstock 1.2 1.6 0.15 0.21

Purchasedforageandshort-termkeep 1.2 1.4 0.16 0.18

Home-grownconcentrateandforagecosts 1.4 1.6 0.19 0.21

Total feed and forage costs 11.9 13.0 1.57 1.71

Veterinary and medicine costs 1.1 1.1 0.14 0.15

Other livestock costs 2.8 3.1 0.37 0.40

Total variable costs 15.8 17.2 2.08 2.26

Overhead costs

Labour - paid 2.8 3.0 0.37 0.39

Labour - unpaid 1.4 2.3 0.18 0.30

Power and machinery 3.7 4.6 0.49 0.61

Machineryandequipmentdepreciation 0.7 1.3 0.09 0.17

Property repairs 0.6 0.6 0.08 0.08

Buildings depreciation 0.3 0.3 0.04 0.04

Rent 1.1 0.9 0.14 0.12

Rentalvalueofownedland 0.4 0.7 0.06 0.09

Finance 0.7 1.0 0.09 0.13

Other operational costs 1.0 1.3 0.13 0.17

Overheads(excludingrentandfinance) 10.6 13.4 1.40 1.76

Total overhead costs 12.9 15.9 1.70 2.10Total production costs and margins

Cashcostofproduction 26.3 29.5 3.47 3.89

Cashnetmargin 7.4 3.7 0.97 0.49

Full economic cost of production 29.2 34.0 3.85 4.48

Full economic net margin 4.8 –0.9 0.64 –0.11

*Thesefiguresincluderevenueandcostsforthedairyherdanddairyyoungstockbeingrearedasreplacements.Thisisthefirstyearwehavebeenabletoincludefullyoungstockcostssopleasenotethesefiguresarenotdirectlycomparabletopreviousyears’results.Ifyouwouldliketoseechangesinmilkproductioncostsovertimeonalike-for-likebasis,pleaseturntopage10.Pleasenotethattotalsmaynotaddupexactly,duetorounding.Source:AHDB,PromarInternationalandpartners

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About the figures ● Accountsfrom258AYRcalvingherdsinGBin2018/19havebeenrankedbyoutput/inputratio,thengroupedintoquartiles

● Theaveragesforthetop25%andmiddle50%groupsarereportedhere ● Youngstockoutputandcostsareincluded ● Subsidiesareexcluded ● ThedataissourcedfromPromarInternationalandpartners ● ThespreadoffarmsinGBmeansweareabletoreportdatafromalargersampleofAYRherdsthanblockcalvers–thismeansthereislikelytobemuch more variation intheAYRresultscomparedwiththeblock-calvingresults


All-year-round calving KPI in focus: full economic cost of production

Higherprofitmarginsareassociatedwith lower production costs(Figure2). Thisassociationisstrongerthanthelinkbetweenprofitmarginsandmilkprices (Figure3).

Figure 2. Full economic cost of production versus full economic net margin for all-year-round calving conventional herds in 2018/19Source:AHDB,PromarInternationalandpartners

Figure 3. Milk price versus full economic net margin for all-year-round calving conventional herds in 2018/19Source:AHDB,PromarInternationalandpartners

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Farmsinthetop25%consistentlyhavelowercoststhanthoseinthebottom25%,asshowninFigure2.However,thetopfarmsdonotalwayshavethehighestmilkprices,asshowninFigure3.Knowing,monitoringandreviewingyourcostofproductioncanhelptoincreaseyourcontroloveryournetmargin.FulleconomiccostofproductionisoneoftheKPIsforAYRcalvingherdsfromourOptimal Dairy Systemswork(Figure4).‘Fulleconomic’meansitcoversall costs to the business,including:

● Feed and forage–bought-inandhome-grown ● Other livestock or variable costs–includingthingslikeveterinarytreatments,bedding,AIandparlourchemicals

● Purchased livestock ● Labour–includingpaidlabourandanopportunitycostforunpaidlabour. Weincludeacostforunpaidlabourbecauseifthatpersonwerenotworkingon thefarm,theywouldbeabletobringinmoneyfromanalternativejob.Italso meansfarmscanbecomparedonalike-for-likebasis,whethertheyusepaid labour,unpaidoracombinationofboth

● Power and machinery–includingspares,repairs,hire,contracting,fuelandelectricity.Thecostofpurchasingmachineryandequipmentisincludedasdepreciation,spreadingthecostoverseveralyears

● Buildings costs–includingrepairsanddepreciation,whichspreadsthecost oftheinitialbuildoverseveralyears

● Rent–wealsoincludeanopportunitycostforanyownedland,whichisthe revenuethatcouldbegainedbyrentingthelandouttobefarmedbysomeone else.Thisallowsfarmstobecomparedonalike-for-likebasis,whethertheyareowned,tenantedoracombinationofboth

● Finance costs–relatedtoborrowing ● Other operational or overhead costs–includingthingslikewater,telephoneand

administration costs

Figure 4. Full economic cost of production for all-year-round calving conventional herds in 2018/19. The dotted lines show the target levels for this KPI within the Optimal Dairy Systems programme. The targets are based on 5-year average figures for the top 5% (excellent), top 25% (good) and average farmsSource:AHDB,PromarInternationalandpartners

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Reviewing full economic cost of production ● WorkoutyourfulleconomiccostofproductionusingourKPI calculator ● Seewhereyourherdperformswellandwhereitcouldimprovebycomparingyourownfigurestothetop25%inTables8 and9

● Topperformingfarmsoftenhaveloweroverheadcosts–ifyou’dlikemoreinformationonreviewingoverheads,pleaseturntopage19

● Starttacklingtheareasyouwanttoimprovebycomingalongtooneofourfarmermeetingsorevents.WehaveagrowingnetworkofStrategicDairyFarmsacrossthecountry,whicharepartofour Farm Excellenceprogramme.Visitthesefarmstoseethelatestpracticalresearch,discussthechallengesfacingyourbusinessandlearnfromotherfarmers.Takealookatourevents webpage tofindmeetingsnearyou

Autumn-calving herds’ performance 2018/19Dairy farms running autumn-calving systems can compare their figures with farms operating a similar system to see where they are performing well and where they could make improvements. The financial performance figures include revenue and costs for the dairy herd and dairy youngstock being reared as replacements.

Overview ● Thenetmarginforthetopquarterofautumn-calvingherdswas9.7pplin2018/19 ● Averagecostsforthedairyherdincreasedbyaround8% compared with the yearbefore

● Thenetmarginforthetopquarterofherdswas6.0pplmore than the middle performersand11.8pplmorethanthebottomquarterofherds

● Thetopfarmsspentlessacrossnearlyallcostareas.Themainareasinwhichtheyperformedbetterwere:- Feedandforage- Labour- Machineryandpower

● Lookingattechnicalperformance,thetopfarmsperformedparticularlywellon:- Higher milk solids output per hectare- Highermilkyieldfromforage- Lower herd replacement rate

Technical and financial performanceArangeoffarmsachievethetop25%performancebracket.Thetop25%of autumn-calvingherdsincludes:

● Herdsizesfrom161–444cows ● Yieldsfrom5,600–9,000litrespercowperyear ● Fulleconomicnetmarginsfrom8.1–12.3ppl.

Keyperformanceindicators(KPIs)fromourOptimalDairySystemsworkareoutlinedinblue in Tables10 and 11.Ifyouwouldliketoseefinancialperformanceonaper-coworper-hectarebasis,pleasetakealookatAppendix6.

https://ahdb.org.uk/optimal-dairy-systems-benchmarking-calculator



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Table 10. Technical performance of autumn-calving conventional GB dairy herds in 2018/19, when ranked by output/input ratio

Top 25% Middle 50%

Herd




Milk production





Milksolidsoutputperhectare(kg/ha) 1,139 1,024

Milkyieldfromforage(L/cow/year) 3,077 2,967

Milkyieldfromforage(kgmilksolids/cow/year) 247 228

Calving



Herd replacement






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Table 11. Financial performance of autumn-calving conventional GB dairy herds (including youngstock*) in 2018/19, when ranked by output/input ratio

Pence per litre £/kg of milk solidsTop 25% Middle 50% Top 25% Middle 50%Output

Milksales 31.4 30.6 3.90 3.98

Calfsales 1.7 1.9 0.22 0.24

Cowsales 1.5 1.9 0.19 0.24


Other income 0.6 0.0 0.08 0.00

Dairy herd valuation change –0.2 0.5 –0.03 0.07

Youngstockherdvaluationchange –0.1 0.1 –0.02 0.01

Total output 34.9 35.1 4.35 4.56

Livestock purchases 0.3 0.6 0.03 0.08Variable costs

Purchasedconcentratesfordairyherd 5.8 8.0 0.72 1.04Purchasedconcentratesforyoungstock 0.9 1.1 0.12 0.14

Purchasedforageandshort-termkeep 0.5 1.1 0.06 0.14Home-grown concentrate and foragecosts 1.7 1.9 0.21 0.24




Total variable costs 12.0 15.7 1.50 2.04Overhead costs

Labour - paid 2.6 3.2 0.32 0.42

Labour - unpaid 2.0 1.7 0.25 0.23





Rent 0.7 1.7 0.09 0.22


Finance 0.4 0.3 0.05 0.04







Full economic net margin 9.7 3.7 1.21 0.48

*Thesefiguresincluderevenueandcostsforthedairyherdanddairyyoungstockbeingrearedasreplacements.Thisisthefirstyearwehavebeenabletoincludefullyoungstockcostssopleasenotethesefiguresarenotdirectlycomparablewithpreviousyears’results.Ifyouwouldliketoseechangesinmilkproductioncostsovertimeonalike-for-likebasis,pleaseturntopage10.Pleasenotethattotalsmaynotaddupexactly,duetorounding.Source:AHDB,PromarInternationalandpartners

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About the figures ● Accountsfrom29autumnblock-calvingherdsinGBin2018/19havebeenrankedbyoutput/inputratio,thengroupedintoquartiles

● Theaveragesforthetop25%andmiddle50%groupsarereportedhere ● Youngstockoutputandcostsareincluded ● Subsidiesareexcluded ● ThedataissourcedfromPromarInternationalandpartners ● ThespreadoffarmsinGBmeanswehavesmallersamplesofautumn-andspringblock-calvingherdsthanAYRcalvers–thismeansthereislikelytobemuch less variationintheautumnandspringblock-calvingresultscomparedwiththeAYRcalving results


Autumn block-calving KPI in focus: overheads (excluding rent and finance)Higherprofitmarginsareassociatedwithloweroverheadcosts(Figure5). Minimisingoverheadcostsisacharacteristicofthetopperformingfarmsacrossallsectors,notjustindairy.YoucanfindoutmoreaboutthethingsthattopperformershaveincommoninourHorizonbrochurePreparing for change: the characteristics of top-performing farms.Gettingfamiliarwithyouroverheadsandreviewingthem canhelpyougainmorecontroloveryournetmargin.

Figure 5. Overheads (excluding rent and finance) versus full economic net margin for autumn-calving conventional herds in 2018/19Source:AHDB,PromarInternationalandpartners

Overheads(excludingrentandfinance)areaKPIforautumnblock-calvingherdsfromour Optimal Dairy Systems work(Figure6).Althoughoverheadsaresometimesreferredtoas‘fixedcosts’,youcantakeactiontoreducethemtohelpimproveyourmargin.Hereiswhatisincludedinoverheads(excludingrentandfinance)andsomesuggestionsforconsideringchanges:

● Labour–thetop25%ofherdsproduceanextra25litresofmilkperlabourhourcomparedwiththebottom25%.Considerwhetherthefarm’slabourisrunningaseffectivelyandefficientlyasitcould.Involvingstaffinare-evaluationoftheworkprocessescanhelpgenerateideasforbetterwaysofworking.Thiscouldfreeupmoretimeforyoutoconcentrateonthefarmbusinessstrategy,whichcouldhavean even bigger positive impact in the longer term

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● Power and machinery–considerwhetheryouarespendingtoomuchmoneyonmaintainingoldmachinery,oronbuyingnewkitthatyoucouldmanagewithout or hire

● Building costs–aswithmachinery,thereisanoptimumbalancebetweenrepairingoldbuildingsandinvestinginnewones.Planningaheadasfaraspossibleisimportant,sodedicatingtimetoworkonthefarm’sbusinessstrategycanproveextremelyvaluable(seethefirstpointonlabour,above)

● Other operational and overhead costs–thesearethelittlethingsthatcanalladdup.Lookingthroughyouraccountsandtrimmingthesesmallercostscanadduptoasignificantsaving.Theremightbesubscriptionsyoudon’tuseoradministrationfeesyoucouldreducebyorganisingthingsdifferently

Figure 6. Overheads (excluding rent and finance) for autumn block-calving conventional herds in 2018/19. The dotted lines show the target levels for this KPI within the Optimal Dairy Systems programme. The targets are based on 5-year average figures for the top 5% (excellent), top 25% (good) and average farmsSource:AHDB,PromarInternationalandpartners

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Reviewing overheads (excluding rent and finance) ● WorkoutyouroverheadsusingourKPI calculator ● Seewhereyourherdperformswellandwhereitcouldimprovebycomparingyourownfigureswiththoseofthetop25%inTables10 and 11

● FindoutwhatthetopfarmsaredoinginPreparing for change: the characteristics of top-performing farms–minimisingoverheadsiscovered onpages6and7

● Starttacklingtheareasyouwanttoimprovebycomingalongtooneofourfarmermeetingsorevents.WehaveagrowingnetworkofStrategicDairyFarmsacrossthecountry,whicharepartofourFarm Excellenceprogramme.Visitthesefarmstoseethelatestpracticalresearch,discussthechallengesfacingyourbusinessandlearnfromotherfarmers.Takealookatourevents webpage tofindmeetingsnearyou

http://ahdb.org.uk/optimal-dairy-systems-benchmarking-calculator





21

Spring-calving herds’ performance 2018/19Dairy farms running spring-calving systems can compare their figures with farms operating a similar system, to see where they are performing well and where they could make improvements. The financial performance figures include revenue and costs for the dairy herd and dairy youngstock being reared as replacements.

Overview ● Thenetmarginforthetopquarterofspring-calvingherdswas10.3pplin2018/19 ● Averagecostsforthedairyherdincreasedsharply–up19%comparedwiththeyearbefore.Thiswasmostlyassociatedwithhigherfeedandforagecostsbecauseoftheextremelydryconditionsduringsummer2018

● Thenetmarginforthetopquarterofherdswas5.4pplmorethanthemiddleperformersand14.7pplmorethanthebottomquarterofherds

● Thetopfarmsspentlessacrossnearlyallcostareas.Themainareasinwhichtheyperformedbetterwere:- Labour- Machineryandpower- Buildings and rent

● Lookingattechnicalperformance,thetopfarmsperformedparticularlywellon:- Higher dairy stocking density- Higher milk solids output per hectare- Highermilkyieldfromforage

Technical and financial performanceArangeoffarmsachievethetop25%performancebracket.Thetop25%of spring-calvingherdsincludes:

● Herdsizesfrom320–960cows ● Yieldsfrom5,100–6,400litrespercowperyear ● Fulleconomicnetmarginsfrom7.9–11.8ppl.

Keyperformanceindicators(KPIs)fromourOptimalDairySystemsworkareoutlinedinblueinTables12and13.Ifyouwouldliketoseefinancialperformanceonaper-coworper-hectarebasis,pleasetakealookatAppendix7.

22

Table 12. Technical performance of spring-calving conventional GB dairy herds in 2018/19, when ranked by output/input ratio

Top 25% Middle 50%

Herd




Milk production





Milksolidsoutputperhectare(kg/ha) 1,359 1,013

Milkyieldfromforage(L/cow/year) 2,869 2,507

Milkyieldfromforage(kgmilksolids/cow/year) 250 217

Calving



Herd replacement






23

Table 13. Financial performance of spring-calving conventional GB dairy herds (including youngstock*) in 2018/19, when ranked by output/input ratio

Pence per litre £/kg of milk solids

Top 25% Middle 50% Top 25% Middle 50%Output

Milksales 32.9 32.0 3.79 3.70

Calfsales 1.8 1.1 0.20 0.13

Cowsales 2.2 2.1 0.25 0.25


Other income 0.1 0.5 0.02 0.06

Dairy herd valuation change 0.4 0.1 0.05 0.01

Youngstockherdvaluationchange 0.7 0.0 0.08 0.00

Total output 38.1 36.2 4.38 4.19

Livestock purchases 0.1 0.3 0.01 0.03

Variable costs

Purchasedconcentratesfordairyherd 4.9 4.8 0.56 0.56

Purchasedconcentratesforyoungstock 0.9 0.8 0.10 0.09

Purchasedforageandshort-termkeep 3.1 1.9 0.35 0.22

Home-grownconcentrateandforagecosts 1.7 2.2 0.19 0.25




Total variable costs 13.2 13.2 1.52 1.53

Overhead costs

Labour - paid 3.5 4.8 0.40 0.55

Labour - unpaid 1.3 1.0 0.15 0.11





Rent 0.4 1.0 0.05 0.11


Finance 0.2 0.3 0.03 0.03







Full economic net margin 10.3 4.9 1.18 0.56

*Thesefiguresincluderevenueandcostsforthedairyherdanddairyyoungstockbeingrearedasreplacements.Thisisthefirstyearwehavebeenabletoincludefullyoungstockcostssopleasenotethesefiguresarenotdirectlycomparablewithpreviousyears’results.Ifyouwouldliketoseechangesinmilkproductioncostsovertimeonalike-for-likebasis,pleaseturntopage10.Pleasenotethattotalsmaynotaddupexactly,duetorounding.Source:AHDB,PromarInternationalandpartners

24

About the figures ● Accountsfrom29springblock-calvingherdsinGBin2018/19havebeenrankedbyoutput/inputratio,thengroupedintoquartiles

● Theaveragesforthetop25%andmiddle50%groupsarereportedhere ● Youngstockoutputandcostsareincluded ● Subsidiesareexcluded ● ThedataissourcedfromPromarInternationalandpartners ● ThespreadoffarmsinGBmeanswehavesmallersamplesofspringandautumnblock-calvingherdsthanAYRcalvers–thismeansthereislikelytobemuchlessvariationinthespringandautumnblock-calvingresultscomparedwiththeAYRcalving results


Spring block-calving KPI in focus: milk solids output per hectareForspring-calvingherds,higherprofitmarginsareassociatedwithmoremilksolidsperhectareofforagearea(Figure7).Thetopperformersachievethisbyoptimisingtheirstockingrateaspartofasoundgrazingmanagementstrategy(Figure8).

Figure 7. Milk solids output per hectare versus full economic net margin for spring-calving conventional herds in 2018/19Source:AHDB,PromarInternationalandpartners

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Figure 8. Dairy stocking rate versus full economic net margin for spring-calving conventional herds in 2018/19Source:AHDB,PromarInternationalandpartners

MilksolidsoutputperhectareisaKPIforspringblock-calvingherdsfromourOptimal Dairy Systemswork(Figure9).Itisworkedoutbytakingtheherd’stotalannualyieldofbutterfatandproteininkilogramsanddividingthisbythenumberofhectaresofforageareausedforthedairyherd.Solidsoutputperhectarecanbeimprovedbylookingat:

● Stocking rates–considerwhetheryourstockingrateandpasturemanagementsystemallowsyoutomakethemostuseoftheforagehectaresyouhaveavailable

● Milk solids–focusingonkilogramsofmilksolidsproduced,ratherthanjustlitres,givesyoumoreinformationaboutherdperformanceandmayalsohelpyoureachhigher payments on your milk contract

Figure 9. Milk solids output per hectare for spring block-calving conventional herds in 2018/19. The dotted lines show the target levels for this KPI within the Optimal Dairy Systems programme. The targets are based on 5-year average figures for the top 5% (excellent), top 25% (good) and average farmsSource:AHDB,PromarInternationalandpartners

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Exploring the world’s most profitable farmsTo help British farms to be more productive and profitable, we can learn from the world’s most successful farms. British dairy products compete with products from other countries in our shops and in export markets, so it makes good business sense to understand how other farms operate.

Overview ● ComparingthenetmarginsoftypicalfarmsintheUKwiththoseoftypicalfarmsinothercountriesthatexportdairyproducts,UKfarmssitaroundthelower-middleareaofthepack(Figure10)

● ThetopquarterofBritishfarmsareachievingsimilarprofitmarginstothemostprofitabletypicalfarmsabroad

● ThemostprofitabletypicalfarmsincludeherdsinPoland,Ireland,Spain,USA,AustraliaandNewZealand

● Thesetypicalfarmsvarywidelyintermsoftheirsize,system,yieldandmilkprice(Figure11).Noparticularsystemorsizedominates

● Themostprofitablefarmsareoperatinginawaythatbestsuitstheresourcesandmarketsavailabletothem.

Figure 10. Position of UK typical farms compared with the 10 most profitable typical farms in selected dairy-exporting countries. This is based on 56 typical farms from 16 different countries, which have been ranked by their full economic net margin for 2018Source:AHDB,IFCN

Reviewing milk solids output per hectare ● WorkoutyourmilksolidsperhectareusingourKPI calculator ● Seewhereyourherdperformswellandwhereitcouldimprovebycomparingyourownfigurestothetop25%inTables 12 and13.ForthisKPI,focusonstocking density and milk solids production per cow

● Well-managedgrasslandisthemosteconomicfeedfordairycows–useourGrassresourcestohelpyoumakethemostofit

● Starttacklingtheareasyouwanttoimprovebycomingalongtooneofourfarmermeetingsorevents.WehaveagrowingnetworkofStrategicDairyFarmsacrossthecountry,whicharepartofourFarm Excellenceprogramme.Visitthesefarmstoseethelatestpracticalresearch,discussthechallengesfacingyourbusinessandlearnfromotherfarmers.Takealookatourevents webpage tofindmeetingsnearyou

10 most profitable typical farms

UK typical farms

Most profitable

Least profitable

The top quarter of British farms are achieving similar margins to the most

profitable typical farms abroad

Typical farms are middle-performing herds that represent the ‘norm’ for milk production in their country.

https://ahdb.org.uk/optimal-dairy-systems-benchmarking-calculator




27

Figure 11. The range in characteristics of the 10 most profitable typical farms from selected dairy-exporting countries. This is based on 56 typical farms from 16 different countries, which have been ranked by their full economic net margin for 2018Source:AHDB,IFCN

Learning more from the top performersWehavelookedatdatafromtwoofthemostprofitabletypicalfarmsinselecteddairy-exportingcountriestofindsomeinterestingareasinwhichBritishfarmsmightbeabletoimprove.Inthissection,wetrytoincludeavarietyoffarmsfromdifferentareas–lastyearwecoveredIrelandandGermany.Thisyear,twotypicalfarmsinSpainandAustraliaattractedourattentionbecause:

● Theyweretwoofthemostprofitabletypicalfarmsin2018,bothappearinginthetop10inagroupof56typicalfarmsfromaroundtheworld

● AlthoughneitherSpainnorAustraliaareverylargeexportersofdairyproducts, thevolumeandvalueoftheirdairyexportsaresimilartotheUK’s

● Bothfarmsoperatedifferentsystemsandhavetheirownstrengthsandweaknesses,inthesamewaythatAYRandblocksystemsintheUKhavedifferentstrengthsandweaknesses.Itisimportanttoconsiderthiswhenlookingatfarmperformancedata–someofthemainadvantagesandrisksforthesetwofarmsaresummarisedintheboxonpage 28

Thefarmsareverydifferent,but–intheirownways–bothmadeapositivenet marginin2018(Table14).WehavecomparedtheirdatatothatofatypicalfarminsouthwestEngland.

SpainOurSpanishfarmisanaverage-sizedfarminnorthwestSpain,with84Holstein–Friesiancows.Around30%ofthedairycowsinSpainliveonsimilarfarms.AnnualrainfallinthisareaofSpainis1,000–1,300mmandtheaverageannualtemperatureis12°C,allowingsomepasturegrazing.Theannualyieldisaround10,000litresperyear, with3.9%butterfatand3.3%protein*.Thecowsarehousedincubiclesandfed onhome-growngrassandmaizesilage,plusbought-inconcentratesandalfalfa. Thefarmis31hainareaandispurelyadairyfarm.Familymembersdoallofthe workonthefarm.

AustraliaThisfarmisalargersizedfarmforAustralia,with393cows.Morethan20%ofthedairycowsinAustralialiveonfarmslikethis.ThecowsareHolstein–Friesian,yieldingaround7,200litresperyearwith4.0%butterfatand3.6%protein*.Thisisagrazingsystemwithanareaof270ha,mostofwhichisirrigatedtoproducegrazedgrassandsomegrasssilage.Concentratesandanyadditionalforageareboughtin.Itispurelydairy,withnootherfarmingenterprises.Familymemberscarryoutaboutone-thirdoftheworkandtherestisdonebyemployees.

*Protein%quotedhereiscrudeproteinbecausethisiscomparablewiththereportingmethodcommonlyusedintheUK

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Comparing performance of typical farmsTable 14. Performance of three typical farms in the UK, Spain and Australia in 2018

UK Spain Australia

Technical performance

Herdsize 259 84 393

Dairyfarmarea(ha) 273 31 271

Stockingrate(livestockunits/ha) 1.6 4.1 2.2

Yield(L/cow/year) 7,752 10,003 7,211

Solidsproduction(kg/cow/year) 588 735 563

Financial performance (ppl)

Milksales 30.4 27.4 24.3

Total output 33.9 31.4 27.0

Feedandforagecosts 14.1 13.9 11.6

Other variable costs 3.9 3.1 1.7

Labourcosts(paidandunpaid) 5.1 3.1 4.9

Machinery* 4.3 2.4 2.4

Power,fuelandwater 1.8 1.3 0.8

Property and buildings* 1.5 1.3 0.0

Rent† 2.3 1.1 1.7

Finance 1.9 1.1 1.2

Other overheads 1.0 1.0 0.8

Full economic cost of production 35.9 28.4 25.1

Full economic net margin –2.0 3.0 1.8

* Includes depreciation† IncludesimputedrentalvalueofownedlandPleasenotethattotalsmaynotaddupexactly,duetorounding.Source:IFCN,AHDB

● Milksalesandtotaloutput(ppl)onthetypicalSpanishandAustralianfarmswerelowerthanontheUKfarm

● FeedandforagecostsweremuchlowerontheAustralianfarmbecauseofitsgrazingsystemandlowrelianceonpurchasedfeed.TheUKandSpanishfarmshadsimilarfeedcostsandbothutilisegrazingaspartoftheirsystem(theSpanishfarmisinnorthwestSpain).TheSpanishfarmusesahigherstockingdensity,gettingasmuchasitcanfromforagetohelpsupportitshigh-yieldingcows.BetterutilisationofgrazingandforagecouldhelpUKfarmstoreducecostsandimproveproductivity

Whenconsideringchangesandimprovements,itiscrucialtolookatthetypeofsystemthatsuitsyourfarmandmilkcontract.ThisAustralianfarmhaslowcosts,butitsmilkproductionisseasonal,whichdoesn’tsuitallfarmbusinessesandmilkbuyers.Itslocalenvironmentandneedforirrigationmeansitisalsoexposedtovolatilityinwaterprices.TheSpanishfarmisabletodeliverarelativelyflatprofile ofmilk,butatahighercost.Itusesmoreconcentrates,soismoreexposedto feedpricevolatility.Everysystemhasitsownadvantagesandrisks.FormoreinformationaboutweighingupoptionsintheUK,takealookatourOptimal Dairy Systemsprogramme.



29

● MachinerycostsontheUKfarmwerenearlydoublethoseontheSpanishandAustralianfarms.UKfarmsoftenspendmoreonmachinerythantheircompetitorsabroad.CarefulconsiderationofmachinerycostsandpolicycouldhelpmanyUKfarmstoreducetheirproductioncosts

● RentcostsperlitreofmilkweremuchhigherontheUKfarm,despiteithavingasimilarareatotheAustralianfarm.Therentalvalueissimilarforbothfarms,ataround£205/ha.ThedifferenceinpplcostsisactuallyduetothehigherstockingrateontheAustralianfarm,whichmakesmoreefficientuseofthegrazinglandavailable(theAustralianfarmisreliantonirrigationtoachievethis)

z

About the figures ● TokeepitrelevanttoBritishfarmers,wehaveonlyuseddatafromfarmsincountriesthatexportdairyproductstoglobalmarkets.Wehaveselected16exportingcountries,whichtogethermadeuparound80%ofglobaldairyexportsin2018

● Withintheseselectedexportingcountries,wehavefocusedthetopperformingfarmswhenrankedbyfulleconomicnetmargin

● ThedatacomesfromtheInternationalFarmComparisonNetwork(IFCN) ● Thefigurescomefromfarmsthataretypicalinthatcountry.Thesefarmsrepresentthemostcommonsystemsproducingthehighestshareofmilkwithintheirregion orcountry.Theirfiguresarenotnationalaverages

● Thisdataisfromthe2018calendaryear ● Youngstockoutputandcostsareincluded ● Decoupledsubsidiesareexcluded.Somefarmsreceivecoupledsubsidiesand

these are included ● Mostcountriesarerepresentedbymorethanonetypicalfarmbecausethereareseveralfarm‘types’presentinthecountry

IfyouwouldlikemoreinformationabouttheIFCNdata,pleasetakealookatAppendix1.

Improving grassland management ● Compareyourstockingrateswiththetop25%ofGBfarmsforyoursystem:- AYRcalving–turntopage 12- Autumncalving–turntopage17- Springcalving–turntopage 22

● ChoosethebestgrassandcloverforyoursystemusingRecommended Grass and Clover Lists

● Getthelatestadviceandresearchongrass,forageandsoilmanagementfromour Grass resources

Driving down machinery costs ● Compareyourmachinerycostswiththetop25%ofGBfarmsforyoursystem:- AYRcalving–turntopage13- Autumncalving–turntopage18- Springcalving–turntopage23

● CheckthecostofrunningamachineagainstthecostofacontractorusingourMachinery cost calculator

● SeehowsomeofourAHDBCereals&Oilseedsmonitorfarmersreviewed their machinerytobetterunderstandtheirequipmentspend

Starttacklingtheareasyouwanttoimprovebycomingalongtooneofourfarmermeetingsorevents.WehaveagrowingnetworkofStrategicDairyFarmsacrossthecountry,whicharepartofourFarm Excellenceprogramme.Visitthesefarmstoseethelatestpracticalresearch,discussthechallengesfacingyourbusinessandlearnfromotherfarmers.Takealookatoureventswebpagetofindmeetingsnearyou.

http://ahdb.org.uk/knowledge-library/recommended-grass-and-clover-lists-2019-20

http://ahdb.org.uk/knowledge-library/recommended-grass-and-clover-lists-2019-20


http://ahdb.org.uk/machinery-costs

http://ahdb.org.uk/news/are-you-spending-too-much-on-your-machinery

http://ahdb.org.uk/news/are-you-spending-too-much-on-your-machinery



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AppendicesAppendix 1 – Methodology behind the data

GB data ● Thedatacomesfromtheannualaccountsof350GBdairyfarms,withfinancialyear-endsbetweenDecember2018andJune2019

● TheGBdataissourcedfromPromarInternationalandpartners ● ThesampleoffarmsisdesignedtoberepresentativeofGBasawholeandisstratifiedbasedon:- Geographicallocation- Levelofmilkproduction- Calvingpattern- Housing period- Typeofcontract- Financialandphysicalperformance

● Thefarmsarerankedbyoutput/inputratio,asameasureofproductivity,thengroupedintoquartilesofthetop25%,middle50%andbottom25%

● Youngstockoutputandcostsareincluded,withtheexceptionofthetimeseriesshowninChangesinmilkproductioncostsovertimeonpage10.Thisisthefirsttimewehavebeenabletoincludefullyoungstockcosts,sopleasenotethefiguresshownforeachsystemarenotdirectlycomparablewithpreviousyears’results. The time series on page10showsfiguresforthedairyherdonly,excludingyoungstock,toallowcomparisonswiththedatawehaveavailablefrom previous years

● Decoupledsubsidies(e.g.theBasicPaymentScheme)areexcluded ● Thefinancialdataareprovidedasacashcostofproductionandfulleconomiccostofproduction.Eachdairybusinesswillhaveitsownmanagementaccountingconventionsforevaluatingfinancialperformance.Bypresentingbothcashcostsandfulleconomiccosts,thisreportprovidestherangeofcostswithinwhichmostbusinesseswillfall.Cashcostsofproductionarerecognisableastheday-to-daycostsofrunningadairyoperation.Fulleconomiccostsallowfarmsofdifferentownershipstructuresandfarmingsystemstobecompared

International data ● OurmembershipoftheInternationalFarmComparisonNetwork(IFCN),whichisbasedinGermany,givesusaccesstoannualdatafrom54dairy-producingcountries around the world

● Thedatacomesfromaselectionof‘typicalfarms’thatrepresentthemost commonsystemsproducingthehighestshareofmilkwithintheirregionorcountry.Thefiguresarenotnationalaverages.Mostcountriesarerepresentedbymorethanonetypicalfarm,becausethereareseveralfarms‘types’presentinthecountry

● Thedataisfromthe2018calendaryear ● TokeeptheanalysisrelevanttoGBfarmers,wehaveonlyuseddatafromfarmsincountriesthatexportdairyproductstoglobalmarkets.Wehaveselected16exportingcountries,whichtogethermadeuparound80%ofglobaldairyexports in2018:- Argentina- Australia- Austria- Belgium- Czechia- Denmark

- France- Germany- Ireland- Italy- Netherlands- NewZealand

- Poland- Spain- UK- USA

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● Decoupledsubsidiesareexcluded.Somefarmsreceivecoupledsubsidiesandthese are included

● ThepenceperlitrefiguresareconvertedfromIFCN’sunits,whichareUSdollarsper100kgofsolids-correctedmilk(SCM,whichisstandardisedto4.0%butterfatand3.3%protein).Theconversionsandcomparisonshavebeenmadeby:- ConvertingtoBritishpoundsandpence,usingtheaverageUSD/GBPexchange

ratefor2018- StandardisingtotypicalGBmilksolidslevels,usingtheaveragebutterfatand

proteinpercentagesinGBfor2018

Appendix 2 – Calculating £/kg of milk solidsMoreandmorepeoplearemeasuringandcomparinginkilogramsofmilksolids,insteadoffocusingsolelyonlitres.Thefiguresinthisreporthavebeencalculatedby:1. Totallitresproducedmultipliedby1.02969,becausethisistheweightof1litreof

milkinkilograms.2. Multiplytheweightofthemilkinkilogramsbytheproportionoffatandprotein

presentinthemilk.Forexample,ifbutterfatis4.0%andproteinis3.3%,totalsolidsare7.3%,soyoumultiplyby0.073.

Appendix 3 – Depreciation ● Thereareseveralwaystocalculatedepreciation.Themethodchosenshoulddependonyourintendeduseofthefigures

● Themethodusedforourfiguresisgivenbelow.Thisallowsusersofthisreporttoassesswhetheritmeetstheirneedsandtoadjustthefiguresfortheirownpurposesifrequired

Machinery–Purchasepricedepreciatedataflatrateof20%perannumover5yearsPlant equipment–Purchasepricedepreciatedataflatrateof4%perannumover 25yearsBuildings–Purchasepricedepreciatedataflatrateof2.5%perannumover40yearsThismethodologyisdifferenttotheDairyperformanceresults(andpreviousEvidencereportsandMilkbenchreports)producedin2016/17orearlier.Theseolderreportsusedratesof7%forbothmachineryandplantequipment(depreciatedover15years)and5%forbuildings(depreciatedover20years).

Appendix 4 – Unpaid labour ● Therearemanywaystocalculateunpaidlabourcosts,dependingonhowyou

decide to value unpaid labour hours ● Themethodusedinourfiguresisgivenbelow.Thisallowsusersofthisreport toassesswhetheritmeetstheirneedsandtoadjustthefiguresfortheirown purposesifrequired

Thenumberofunpaidlabourhoursusedisconvertedintocostsbasedonfulltimeequivalents(FTE)working2,860hoursperannumandearningawageof£30,000 perannum.ThismethodologyisdifferenttotheDairyperformanceresults(andpreviousEvidencereportsandMilkbenchreports)producedin2016/17orearlier.TheseolderreportsusedanaveragehourlyrateforagriculturalworkersfromtheOfficeforNationalStatistics.

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Appendix 5 – All-year-round calving herds’ performance 2018/19 in £ per cow and £ per hectareTable 15. Financial performance of AYR calving conventional GB dairy herds (including youngstock*) in 2018/19, when ranked by output/input ratio

£ per cow £ per hectareTop 25%

Middle 50%

Top 25%

Middle 50%

OutputMilksales 2,741 2,570 5,494 4,880Calfsales 117 89 234 169Cowsales 158 198 317 376Youngstockheifersales 14 17 28 33Other income 0 0 0 0Dairy herd valuation change 19 –8 37 –15Youngstockherdvaluationchange 14 4 27 8Total output 3,062 2,871 6,138 5,451 Livestock purchases 47 82 93 156

Variable costsPurchasedconcentratesfordairyherd 732 729 1,467 1,384Purchasedconcentratesforyoungstock 104 137 208 260Purchasedforageandshort-termkeep 109 121 219 231Home-grownconcentrateandforagecosts 128 136 257 259Total feed and forage costs 1,073 1,123 2,151 2,133 Veterinary and medicine costs 98 99 196 187Other livestock costs 251 264 503 502Total variable costs 1,422 1,486 2,850 2,822

Overhead costsLabour–paid 255 257 511 489Labour–unpaid 126 196 253 373Power and machinery 336 398 673 757Machineryandequipmentdepreciation 64 113 129 215Property repairs 57 55 114 105Buildings depreciation 29 26 59 50Rent 96 76 192 144Rentalvalueofownedland 40 57 81 107Finance 64 85 129 161Other operational costs 90 112 181 213Overheads(excludingrentandfinance) 957 1,159 1,918 2,201Total overhead costs 1,158 1,376 2,320 2,613

Total production costs and marginsCashcostofproduction 2,366 2,552 4,743 4,847Cashnetmargin 664 322 1,330 611Full economic cost of production 2,626 2,945 5,264 5,591 Full economic net margin 436 -74 874 -140

*Thesefiguresincluderevenueandcostsforthedairyherdanddairyyoungstockbeingrearedasreplacements.Thisisthefirsttimewehavebeenabletoincludefullyoungstockcostssopleasenotethesefiguresarenotdirectlycomparablewithpreviousyears’results.Ifyouwouldliketoseechangesinmilkproductioncostsovertimeonalike-for-likebasis,pleaseturntopage10.Pleasenotethattotalsmaynotaddupexactly,duetorounding.

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Appendix 6 – Autumn block-calving herds’ performance 2018/19 in £ per cow and £ per hectareTable 16. Financial performance of autumn block-calving conventional GB dairy herds (including youngstock*) in 2018/19, when ranked by output/input ratio


Middle 50%

Top 25%

Middle 50%

OutputMilksales 2,323 2,355 4,445 4,075Calfsales 129 144 246 250Cowsales 111 143 213 248Youngstockheifersales 8 7 15 12 Other income 45 2 87 4Dairy herd valuation change –18 39 –35 68Youngstockherdvaluationchange –9 7 –17 13Total output 2,589 2,698 4,954 4,670 Livestock purchases 19 47 36 82

Variable costsPurchasedconcentratesfordairyherd 431 615 825 1,064Purchasedconcentratesforyoungstock 70 82 134 141Purchasedforageandshort-termkeep 36 82 69 141Home-grownconcentrateandforagecosts 123 143 235 248Total feed and forage costs 660 922 1,264 1,595 Veterinary and medicine costs 71 98 135 169Other livestock costs 161 187 307 323Total variable costs 892 1,206 1,706 2,087

Overhead costsLabour–paid 192 250 367 432Labour–unpaid 148 134 284 232Power and machinery 226 287 432 496Machineryandequipmentdepreciation 56 103 107 178Property repairs 48 57 92 99Buildings depreciation 59 35 113 60Rent 53 128 102 222 Rentalvalueofownedland 87 44 167 77Finance 28 24 53 42Other operational costs 62 97 119 168Overheads(excludingrentandfinance) 790 962 1,512 1,665Total overhead costs 959 1,159 1,835 2,006

Total production costs and marginsCashcostofproduction 1,519 2,097 2,906 3,628Cashnetmargin 1,097 555 2,099 961Full economic cost of production 1,869 2,413 3,577 4,175 Full economic net margin 720 286 1,377 495


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Appendix 7 – Spring block-calving herds’ performance 2018/19 in £ per cow and £ per hectareTable 17. Financial performance of spring block-calving conventional GB dairy herds (including youngstock*) in 2018/19, when ranked by output/input ratio


Middle 50%

Top 25%

Middle 50%

OutputMilksales 1,884 1,719 5,147 3,746Calfsales 100 61 274 132Cowsales 124 115 339 251Youngstockheifersales 0 21 0 46Other income 8 27 21 59Dairy herd valuation change 24 4 67 9Youngstockherdvaluationchange 38 2 105 5Total output 2,179 1,949 5,952 4,248 Livestock purchases 6 15 17 34

Variable costsPurchasedconcentratesfordairyherd 279 259 762 564Purchasedconcentratesforyoungstock 50 42 138 92Purchasedforageandshort-termkeep 176 104 482 226Home-grownconcentrateandforagecosts 96 116 262 253Total feed and forage costs 602 521 1,644 1,135 Veterinary and medicine costs 46 53 125 116Other livestock costs 108 138 295 301Total variable costs 755 712 2,064 1,552

Overhead costsLabour–paid 199 256 543 559Labour–unpaid 73 52 199 113Power and machinery 227 256 621 557Machineryandequipmentdepreciation 24 15 66 32Property repairs 58 78 158 171Buildings depreciation 31 44 85 95Rent 22 53 61 115Rentalvalueofownedland 121 137 331 298Finance 14 14 37 31Other operational costs 60 55 163 121 Overheads(excludingrentandfinance) 672 756 1,836 1,648Total overhead costs 829 959 2,266 2,091

Total production costs and marginsCashcostofproduction 1,341 1,440 3,665 3,138Cashnetmargin 775 503 2,116 1,096Full economic cost of production 1,591 1,687 4,346 3,677 Full economic net margin 588 262 1,606 571


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Producedforyouby:AHDB Dairy Stoneleigh Park Kenilworth Warwickshire CV82TL

T 024 7669 2051 E [email protected] W ahdb.org.uk

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