Reducing cost of milk production

Feed represents one of the largest cost centres within dairy farming and is an obvious cost to be reduced. Concentrates generally represent 20 - 25 percent of the costs of production, although the cost can be as low as 5 - 10 percent. Increasing milk from forage utilising the cheapest feeds available to the dairy herd results in increased margins over purchased feed and forage, increased gross margins and reduced total costs.

Grass is the cheapest feed available for feeding dairy cows on N. Ireland dairy farms followed by silage and then concentrates as indicated in Table C. below. The cost per tonne of dry matter takes into account variable and fixed costs including storage and feeding costs plus a rental value for land of £250/ha. Relative feed values in comparison with concentrates take account of the energy and protein values of the different feed types.

The cost of silage will depend to a large extent on the rental value of land and the storage costs associated with silage. However, certain straight feeds such as maize gluten can compete with silage, provided suitable feeding systems are available.

Milk from forage and margin over purchased feed and fertiliser – Milk Chek results

Grazed grass and grass silage are the cheapest sources of feed for dairy cows relative to purchased compound feeds. Milk from forage is a measure of the relative efficiency of use of grazed grass and grass silage between farms. The data available from Richardson’s Milk Chek data (Figures D) indicate that as Milk From Forage increases, margin over purchased feed and fertiliser per litre increases, demonstrating clear financial benefits from increasing milk from forage.

Figure D Milk from forage and margin per litre – Milk Chek data

Milk from forage and gross margins – Milk Manager results

The financial benefits of milk from forage have also been demonstrated from the Milk Manager service. Quartile analysis from gross margin per cow shows that as milk from forage is increased, gross margin per cow rises.

Figure E. Milk from forage and gross margin per cow – Milk Manager Data Comprehensive Business Service

Milk from forage and net margins/total production costs – 4500 Club results

The 4500 Club consists of 12 commercial dairy farms across N. Ireland, benchmarking with the Greenmount College High Forage Herd. All these farms are achieving high levels of milk from forage. The production systems operated and the milk yields achieved on these farms vary depending on farm resources and priorities. Some farmers are producing high yields of milk from forage with minimal concentrate inputs and average yields per cow, while others are producing high yields per cow with a large proportion of the yield attributed to forage. The physical performance of the herds involved in the 45 Hundred Club are illustrated by the data in Table 4.

Table 4. Physical performance of the 45 Hundred Club 1997/98

At a financial level, the farms involved are all keeping detailed farm management accounts. This allows total milk production costs to be calculated for each farm. Table 5. below illustrates the range of milk production costs on the farms involved.

Table 5. 45 Hundred Club production costs per litre.

The data available to date clearly shows that farmers achieving high levels of milk from forage can produce milk at a total cost of 11.0 pence per litre. Increasing milk production from forage has a direct impact on variable costs of production. It is important to note that there is more fluctuation in overhead costs than in variable costs. Variable costs are being controlled through achieving high levels of milk from grass and silage. Control of overhead costs requires equal attention to reduce overall milk production costs.