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Kingshay's Dairy Costings Focus Report 2019 - RELEASED

Large herds growing rapidly, reveals Kingshay reportDCFR 19

Large dairy herds are growing rapidly, both in terms of size and productivity, according to the annual Dairy Costings Report from Kingshay.

Based on actual figures from almost 2,000 herds with 400,000 cows across the UK, smaller herds produced less milk in 2017/18 than the previous year, likely due to the summer drought curbing production from grazing.  In contrast, the higher producing herds boosted milk output by progressively larger amounts – rising by 1.2% in the 0.5-1m litre bracket all the way up to a 5.1% increase in the over 5m litre band.

Not only have the highest producing herds boosted milk yields per cow, they have grown their herd size by an average of 17 cows, to 743 head in 2017/18. This trend can be seen in each of the past three years.

“Higher output herds are less reliant on grazing, so the summer drought had less of a negative impact than in lower output herds,” explains Kathryn Rowland, senior farm services manager at Kingshay.

“Larger herds are also more likely to be on aligned contracts, with a more stable milk price enabling a continued investment programme to increase output: Margins increased steadily in line with overall herd production, from £1,287/cow in the smallest bracket to £2,120/cow in the largest group. In addition, the largest producers tend to benefit from improved efficiencies and clearly have an appetite for continued expansion.”

Large herds have a disproportionately high impact on UK milk production. Herds producing over 5m litres represented only 3% of Dairy Manager costings, and yet contributed 14% of the total milk sales – and they accounted for a whopping 27% of the year-on-year increase in production across the whole pool.

“Is this an indication of processors and producers being supply driven rather than demand led?” questioned Ms Rowland. “It would be interesting to see what impact this will have on the milk price for the whole market.”

Other notable trends in the report include the impact that the 2018 drought had on production, culling rates and herd size. For the first time in the past decade, the average herd size dropped, with culling rates up from 27% to 29%, probably due to the lack of forage.

Unsurprisingly, milk production from forage eased back to average 29% of overall yields versus 31% last year – in itself a difficult season. That said, producers managed to keep yields up - by feeding more concentrates. On average, yields came in at 8,352 litres this year against 8,172 litres last year, while concentrate use increased from 2,584kg/cow to 2,683kg/cow.

Input prices have generally increased over the past year, with concentrates reaching a five-year high in 2019. Over the same time, milk prices have improved from 28.78p/litre to average 28.99p/litre – not enough to offset the higher costs of production, so the average margin over purchased feed declined from £1,729/cow to £1,713/cow.

Heat stress led to an increase in many health issues, and yet, when comparing the top 25% and the average, it’s clear that there is plenty more that producers can do to reduce health problems, with combined savings of £13,836 per 100 cows from improved health status and savings of £20,250 per 150 cows from better fertility.

So, what’s the outlook given current trends? “Global dairy production is under pressure, which could maintain relatively firm milk prices,” says Ms Rowland. “However, another dry summer, alongside high concentrate costs, means it’s vital to keep striving for marginal gains in health, production and expenditure, by benchmarking against the top producers to secure the same success.”

Download your free copy of the Dairy Costings Focus Report from the Kingshay website or pick up a copy from the Kingshay stand at UK Dairy Day (Stand F7) or at The Dairy Show (Stand 226).