Waterfield & White have recently examined the data from our benchmarked farms over the last 5 years.  The overall outcome continues to confirm that there is no one silver bullet for success that enabled the top 25% to increase their overall margins by 2.43 pence per litre.  However, there were 6 key ‘silver bullet’ areas for the top farms, 3 where they saved more and 3 where they spent more.
Where the Money Goes

The graph highlights in percentage terms the proportion of total income that has been spent on the dairy enterprises.  The Comparable Farm Profit results show that the Average Farm retained 20.1% of total income while the Top 25% retained 26.4% of their total income.

Key Trends for the Top 25%

Where to Save:
• Purchased Feed, 19.2% of Total cost.  As the highest input cost this is a key area to get right.  Excellent forage quality, grazing and effective feed utilisation will bear a strong relationship to the 0.56ppl savings for more profitable farms.
• Labour, 14.6% of Total Cost.  Labour costs that are 0.35ppl lower does not mean paying poor wages for long working hours.  The provision of a good working environment for highly trained staff to carry out their duties efficiently must be a priority.  The use of outside contractors for key operations from foot trimming to silage making is a key calculation for managers to make.
• Overheads, 6.5% of Total Cost.  A 0.22ppl saving highlights the importance of balancing milk output and spending.  Variations in water, insurance and admin costs offer the largest variations to examine.

Where to Spend:
• Youngstock.  A greater investment of 0.22ppl more in youngstock purchased feed was noticeable.  Growing heifers well early in life produces heifers that are capable of high rates of 1st service conception rates.  The average cost of rearing a heifer in 2015 was £1,135/hd.
• Crop Costs.  Excellent forage quality and utilisation does not come for free.  The extra investment at 4.33ppl in fertiliser, reseeding and silage making enables improved rates of milk from forage alongside offering the correct stage of grass growth to a grazing cow.
• Depreciation.  The top farms had depreciation of 1.69ppl based on 5 year lifespan for machinery and 10 years for building investments.  It will be no coincidence that an overall lower spend relates back to a correct level of business investment.

Increasing Business Income

The 1.35ppl higher income for the Top 25% of business was derived more from stock sales (0.85ppl) than milk price (0.5ppl).  The quality of cull cows, calf value and the ability to sell surplus breeding stock either as milking cows or heifers contributed significantly.  The achievement of high rates of fertility from the correct breeding choices alongside structured cow management moves a business from involuntary to voluntary culling/sale decisions.  This must be a key aim for all dairy businesses.

Summary

• Benchmarking is not only about saving money, it is also working out where best to invest for the future.
• Improving profitability is a combination of:
o Improving income through increasing stock sales and reducing the cost of replacing a cow
o Reducing overall costs through a combination of investment to allow cost reduction in key areas such as feed and labour
• The ‘basics’ of good cow management must never be forgotten.
• Involving outside consultancy and benchmarking what you do, is an important part of achieving all of the above.

To discuss benchmarking, please contact your local FCG office and to discuss this report further, please contact Chris at Waterfield & White Ltd at chriscoxon@fcgagric.com