From the recently published Cost Of Dairy Production Report to March 20 by FCG & Old Mill Accountants from the Wessex region, there is £563/cow (8ppl) difference or £81,072 on combined power and machinery and labour costs between the top and bottom 10% of dairy herds analysed. The average is £982/cow. Cost of Doing Work or cost of moving things about (CODW) is another term for the collective total of these overhead expenses. The best businesses achieve closer to 10ppl or £700-£800/Cow depending on yield. With big differences between dairy farms in CODW there is considerable scope to reduce costs.
I see too many livestock farmers with too much capital tied up in machinery which they haven’t got the skills, or the people employed with the skills to manage. Labour and contractors poorly managed, excess tractor HP used inefficiently, spending too long moving/pumping slurry around buildings/onto land, trying to carry out too many timely operations in house, justifying machinery investment on the net cost to change or the instant last minute tax savings and long travel times between fragmented land blocks are just some of the uneconomical practices that evolve over time.
It is quite common to see CODW increasing by 1.25ppl on dairy farms in the past 5 years even with significant increase in output. It is also evident that the lower a dairy farmer’s CODW, the higher the probably of increased profits, even more than technical efficiency!
What is your CODW and what are you doing to keep this group of costs under control? Contact Gerard at email@example.com or your local FCG Office, to benchmark your dairy business today to highlight your dairy business strengths and weaknesses.
The Cost of Production report is available here as a pdf. version or you can request a copy from the office on 01935 850093.