June 9, 2016


AB Vista: Need for fundamental shift in dairy focus from output to efficiency


The future profitability and sustainability of dairy farms in the UK and Ireland depends on a fundamental shift away from a focus on output, to instead making technical efficiency and margin over costs of production the top priorities.


That was the message to emerge from the AB Vista business insight seminar series held during May in Coventry, UK, and Armagh, Northern Ireland.


Under the banner "Profitability in a challenging market", the seminar focused on expanding farmer and consultant thinking beyond the traditional approaches to boosting profitability.


"The clear message was 'think margins not output', as higher output doesn't always deliver better margins," Josh Daly, AB Vista's sales and marketing manager for GB & Ireland, highlighted. "It appears that there's no clear link between the number of litres produced and profitability, it's how those litres are produced that matters, with efficiency and maximising milk from forage critical to success."


Speakers at the seminar included representatives from the banking, farm business consultancy and animal nutrition sectors.


The need to also manage market volatility by making better use of forward contracts on inputs was highlighted by Mark Suthern, National Head of Barclays Agriculture, whilst Promar International Divisional Director John Giles promoted the need for a more pro-active approach to supplier relationships and greater benchmarking to help drive improved efficiency.


Adding to this, Jason McMinn of Farmgate Consultancy pointed out the limitations of margin over feed as an indicator of net farm profit, with factors like a 3% change in cow mortality worth the equivalent of 1ppl. He went on to highlight the fact that increased values for butterfat and milk protein bonus payments relative to the milk price (compared to a few years ago) made higher milk solids levels one of the most effective ways to improve margins.


"Choosing the right feeds and the right supplements to optimise rumen function and drive feed efficiency is vital," Daly continued. "But without the right infrastructure, management, animal husbandry and business planning, the potential gains are easily lost."


"What's needed in today's markets is an approach that tackles those nutritional challenges within the broader context of a farm business focused on improving efficiency across all fronts," he added. "Whether that's achieved through restructuring, new investment or reducing waste, it's likely that the full on-farm benefits will only be gained if it's seen as part of a wider collaboration that spans the whole supply chain, from input supplier to farmer to processor."

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