Milk production set to drop unless feed costs covered

Published 15 August 18

Many farmers have managed to maintain milk production levels through the hot, dry summer but only by using precious silage stocks and bought-in feed. That was the key message at AHDB’s recent Milk Forecasting Forum*.

The knock-on impact into the autumn and winter will be challenging. Low levels of winter feed will leave farmers with the unenviable choice of destocking, drying off early or buying in more feed. The increase in demand for feed, at a time when growing conditions have been poor, is pushing concentrate feed prices up. These price increases, alongside higher usage of bought-in feed, will hit farmer margins.

Previous AHDB modelling suggests there is a strong relationship between the MFPR# and milk yields. If concentrate feed prices increase and milk prices remain stable, the MFPR will reduce. This in turn tends to lead to lower milk yields. Based on this modelling, if nothing else changed, a 10% increase in concentrate feed costs would be expected to lead to a 2-3% drop in milk yields, and 160m litres less milk in the country over the back six months of the year. Under such circumstances, to maintain milk yields, average farmgate milk prices would need to rise by a similar amount to feed costs, to support the MFPR.

GB milk scenarios Oct18-Mar19 

The price of concentrate feed is only one element of the issue. Forum attendees also reported that the maize crop has suffered in many parts of the country. Low maize yields and lack of grass silage will see farmers forced to buy in fodder as well as concentrate feed. In addition, the cost of mechanised feeding, slurry management and additional labour after a very challenging spring will mean the impact on margin could be severe.

An alternative option is to destock. We have recently seen a rise in the number of cull cows being sent for slaughter, with 9,000 head (19%) more throughput in July compared with July last year. This will be a mix of beef and dairy cows, and from a dairy perspective, this currently appears to be mainly low yielding or dry cows. However, a reduction in the overall milking herd would reduce national milk production even further.

The full pack of information from the Milk Forecasting Forum can be found here.

* Twice a year, AHDB brings together key industry experts to discuss national milk production, and the factors that could impact on it over the coming 12 months. This group includes consultants, milk processors, farming unions and government officials.

# MFPR is the AHDB Milk to Feed Price Ratio