Friesian Farm Update February 11, 2014 12:00 am The UK dairy industry is currently making reasonable returns. This looks set to continue through the 2014/15 milk year according the latest update of Andersons’ Friesian Farm model . However, the prospects further ahead become more uncertain. Friesian Farm is a notional 150 cow business in the English Midlands with a non-aligned liquid milk contract. Three years’ full figures are summarised in the table below – the previous milk year, the one soon ending and then the forthcoming year. FRIESIAN FARM MODEL – Source: The Andersons Centre Pence per litre 2012/13 (Result) 2012314 (Est.) 2014/15 (Budget) 2015/16 (Budget) Milk 28.8 33.2 34.6 31.4 Culls & Calves 3.0 3.1 3.1 Output 31.8 36.3 37.7 Variable Costs 16.7 14.8 14.2 Overheads 11.5 11.8 11.9 Rent, Finance & Drawings 5.4 5.6 6.1 Cost of Production 33.6 32.1 32.2 Margin from Production (1.8) 4.2 5.5 SPS (and ELS) 2.2 2.2 2.1 1.7 Business Surplus 0.4 6.4 7.6 ≈ 4.0 The farm made a considerable loss before support payments in 2012/13 due to a combination of high costs and low output. The difference in profitability between 2012/13 and 2013/14 shows the largest ever yearly swing in Friesian Farm’s returns. For 2013/14 feed costs abated slightly, and volumes of purchased feed were lower due to better silage quality. However, it is the much-improved milk price (up by over 4ppl on the year) that has really changed the profitability for this business. Looking to 2014/15 the average milk price may be up again (not so much through further price increases, but simply having higher prices from the start of the year). This will be accompanied by a further fall in variable costs. Feed prices may reduce slightly, and fertiliser is budgeted to cheaper. Overall, profitability may be even higher than 2013/14 (at record levels). For 2015/16 we expect milk prices to come back down as world output continues to increase. There will also be changes to support levels as the BPS is introduced. This reduces the budgeted profitability.
