Profitability figures from our Friesian Farm model are shown in the table below. This is a notional 220+ cow business in the Midlands with a milk contract on a constituent basis. It has a year-round calving system, like much of the UK industry, but it is trying to maximise yield from forage. The figures are for milk years – April to March.
The 2022/23 year was a very profitable one for most dairy farms. Milk prices rose to unprecedented levels and although costs went up a lot as well, many dairy farmers made record profits. During the 2023/24 year milk prices declined considerably. With costs ‘sticky’ on the way down, the business only broke even from its farming activities. The decline in the BPS in England can be clearly seen. For 2024/25 however, this farm has gone into the SFI. This adds a useful amount to the bottom line (although there are costs to the scheme which are included in the farming margin). Milk prices are firming but there is a question over how far and fast any rises may be. Overhead costs drop for 2024/25 – this is due to cheaper fuel and electricity, but also due to unusually high contract costs during the previous year. A strong recovery in profitability is forecast for the current year.
The final column is our first forecast for 2025/26. An improving dairy market outlook sees the milk price up 1ppl. Variable costs have remained fairly stable over the last couple of years and we forecast them just rising with a normal level of inflation. Forecast overhead costs would have fallen for the year but the farm has budgeted to make some long-term investment in slurry storage. We can clearly see the level of BPS declining, but together with the SFI payment the total is currently still more than support received in 2019/20 – a reminder that the costs of undertaking the actions to be in SFI (i.e herbal leys) are much higher than the BPS, but these have been accounted for in the farming margin. Overall, however, the budget for 2025/26 shows some good returns – but it should be remembered that a lot can change in 18 months.
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