Falling feed costs have not been enough to pull dairy farmers back into profit-making territory this year, with producers forecast to make average losses of 1p/litre, analysts have warned.
Milk production costs are predicted to fall by nearly 1p/litre this year, as good grass and grain harvests have allowed dairy producers to buy less feed at a reduced cost, but they will still be losing money, said Kite analyst Edward Lott.
The average net cost of production is set to be 29.1p/litre in the year ending March 2020, down from 30.03p/litre the previous year, according to Kite benchmarking figures.
The figures include both variable and fixed costs, and allows for rent, finance and family labour, but also takes subsidy income into account.
A decline in the milk price from some processors, as well as a fall in income from cull cow and calf sales, have held back producers from recovering, said Mr Lott.
There have also been increased costs brought about by the continuing weakness of the pound.
Speak to banks early
Farmers who feel they will need additional financial support to get through the costly winter season need to rapidly gain an accurate idea of their costs and speak to their bank as early as possible, Mr Lott advised, as many are not as eager to lend as they were in the past.
“Efficiency at a cow level is absolutely key,” he said. “Output of milk per farm will still inevitably grow as the industry restructures, but environmental pressures mean we need to make sure every cow place is being maximised.”
The outlook comes after a challenging year for the sector, when nearly half of dairy farm businesses shrunk in value and the gulf widened between the best-managed enterprises and the rest, according to new research.