Whenever discussions turn to cost of production and milk price, the first question that arises is ‘what should you include.’ Very obviously one has to include all the cash costs and a sufficient sum to cover the family labour employed within the farm. In the medium term one has to provide for capital reinvestment in the form of depreciation. But what about a return on the capital invested in the business? Some would call this a notional cost, but to me as farmers, we are in business to make a return.

I was at the recent European Dairy Farmers meeting in Hampshire and one of the key sessions was on cost of production comparisons across the membership from 20 countries in Europe. EDF use a term of breakeven milk price either including notional costs or without notional costs and depreciation. In calculating this other income from cull sales calves are removed. I think of this cost as the bottom line price required. One area that surprised me was the variance in this other income from less than 1ppl to more than 4.0 ppl in some cases.

EDF Cost Comparison Report

(All the figures and easy to see the key facts)

I always come away from these European meetings realising how well the UK performs in terms of profitability and efficient milk production.  Whilst our milk price is often towards the bottom of the league table, we are at amongst most profitable industries in Europe.