A REPORT unveiled at the Dairy Show today (October 2) has revealed that dairy farmer's profits dropped 'more sharply' than expected in 2023/24. 

The annual Milk Cost of Production report by Old Mill and the Farm Consultancy Group (FCG) show that the average income from milk in 2023/24 was £2,910/cow – a drop of 19% year-on-year, due to lower milk prices. 

The report also said the cost of production remained high at £3,153/cow, leading to a shortfall of £243.

After accounting for non-milk income, but excluding Basic Payment Scheme income, rent, interest, drawings, tax and capital expenditure (and including depreciation and a labour charge of £30,000 per full-time partner or director), businesses averaged a profit of £152/cow. Last year that was £914/cow.

The average herd size fell from 303 head to 295 head, while yields dropped from 7,906 litres to 7,256 litres/cow due to poor silage made last year.

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The report also said feed costs dropped, but labour and machinery costs increased. 

Andrew Vickery, head of rural services at Old Mill, said: “It was only through selling stock that most businesses managed to remain profitable. 

"The five-year profitability average is £478/cow, showing that milk prices have been notably low this year.

“The ‘cost of doing work’, namely power, labour, contracting and machinery costs, are increasingly key to financial performance (rising 10.7% this year), whereas in the past, feed and other variable costs took the headlines.

"Given that these costs are often fixed, it shows that life for the smaller herds shows no sign of becoming easier. Tellingly, there is a difference of 237 cows between the average herd size of our top performers (404 cows) and the smaller herds of our bottom 10% (167 cows).

“The bottom 10% were unable to cut their spend in this time of reduced prices, which led them to making a loss of 15.73p/litre compared to a profit of 12.65p/litre for the top 10%. 

“However, there are a variety of farming systems in the bottom 10%, showing that farming efficiently relies on the farmer and not the system.”

According to Old Mill, the 2024/25 milk year is expected to return a milk income of £3,308/cow against a cost of production of £3,122/cow. On average, profits are predicted to rise to £590/cow.

“Those businesses that retained enough cash during the better times of 2022 were the ones best able to weather the storm of the past 12 months,” added Mr Vickery.

“It is those businesses that should be best placed to reap the rewards of a more positive outlook for dairying in the short to medium term.”