This time last year, I wrote an article on the correlation between milk price and production. As highlighted from the table below, as milk price reduced in 2014/15 and 2015/16 from 32.7 ppl average to 24.1 ppl average, farmers reacted by increasing output by 8% over two years. Finally, market forces prevailed aided by the milk reduction scheme and less favourable feed quality to reduce production by 5.2% in 2016/17. Consequently, milk prices have increased by 5.6 ppl on average to 29.4 ppl (estimated average by March 2018).
Interestingly, the 2014/15 average daily production of 39.4 million litres and average milk price of 29.4 ppl will both be repeated again in 2017/18 for the UK!
Many factors affect milk production at both farm and national level, but there is a clear correlation between output and milk price. Why not focus on producing your milk more efficiently? This does not mean increasing output. It may mean using fewer inputs to get similar output, which can be replicated year after year. It may mean culling the less productive part of your herd. It may mean growing and using more forage in your livestock diets. If the industry can reduce cost and maintain output, then it’s a “win, win” with a decent milk price resulting in more profit in you the farmers pocket!
For more information, please contact Gerard Finnan at email@example.com or your local FCG office.