Dairy farmers urged to focus on bottom line while embracing new regulations

The supply chain proposals set to come into force later this year include clearer pricing terms, with contracts setting out what factors generate the milk price. Farmers will also be able to challenge prices if they feel the process is not being followed.

The proposals were welcomed by dairy consultancy Kingshay, part of the VetPartners Group, as they seek to increase fairness and transparency for farmers. At the same time, Kathryn Rowland, senior farm services manager at Kingshay, said more detail is needed to understand how the proposals will operate in practice.

She also urged farmers not to lose sight of the continuous goal to cut costs and increase productivity in dairy businesses.

“Regardless of what legislation is in place, farmers must remember they only have so much control over the milk price they’re receiving, and they should instead focus on the things they can control, such as costs of production and technical efficiency,” she said.

According to Kingshay’s annual Dairy Costings Focus report, milk prices are generally quicker to drop than they are to rise, as evidenced by market trends over the past year.

Ms Rowland, who is a co-author of the report, said despite prices being up 61% in the past 10 years to peak at 50.98p/litre in December 2022, there was a sharper drop in prices in the first half of 2023 – with prices falling faster during this period than they rose in the second half of 2022.

“While stronger prices are good news for farmers, it’s important to keep on top of costs and benchmark performance against peers – especially farmers in the bottom 25%, in terms of performance,” she said.

“Areas of focus for all producers should include maximising their milk contract, feed efficiency, herd health, and fertility. This is where the bottom 25% of herds (ranked by margin over purchased feed) can benefit the most from financial gains, working closely with their vet and nutritionist,” Ms Rowland advised.

The annual Dairy Costings Focus report is designed to help farmers with benchmarking and evaluate costs in different areas of the business in comparison to other dairy operations. This can highlight key areas for marginal gains, which all add up to a healthier bottom line and greater business resilience.

For more detail on the new dairy supply chain proposals and what they mean for farmers, visit: https://www.farmersguide.co.uk/livestock/dairy-beef/new-dairy-regulations-promise-to-promote-fairness/