Premiums needed for changing milk market

Dairy fortunes are showing signs of recovery – but milk prices still have some way to go to cover production costs on many farms.

Values have steadily risen over the past year following a sharp drop to 36.49ppl in July 2023. But they frequently fail to provide a fair return for family labour, says the latest annual Kingshay Dairy Costings Focus Report.

The gap between the highest and lowest milk prices has also fluctuated, peaking at 13.8ppl in March 2023 before narrowing to 11.6ppl in March 2024, says Kingshay senior farm services manager Kathryn Rowland.

Efficiency ranges widely across production systems. All-year-round calving herds with a housing focus produce the greatest margin per cow (£2,495); and autumn / split block calving herds with a grazing focus the highest margin per litre (29p).

Changing market

“It’s clear the UK milk market is changing as retailers and consumers demand more. Given the increased focus on climate change, it is essential that the market can deliver premiums to cover the extra effort and costs on-farm.

“Milk processors like First Milk are already offering premiums for regenerative farming practices and going forward, it is likely that the range in pricing even within contracts – let alone between them – is going to widen.”

Average milk yields have slightly increased over the past decade and remain in the mid 8,000 litres/cow range, says the Kingshay report. But milk solids have hit a new record of 646kg/cow, it adds.

This marks almost an 11% increase over the past 10 years, outpacing the 5.4% rise in milk yield. This is most likely due to producers focusing on feed efficiency and fulfilling their milk contract requirements.

Bigger herds

Average herd sizes have increased by two head, year-on-year, and now stand at 219 cows compared to 185 in 2014. Stocking rates have also seen a rise, reaching 2.39 cows/hectare compared to 2.25 a decade ago.

Atrocious weather during the current season means milk from forage has decreased by 3% on last year, to 2,691 litres per cow. But Scotland managed to buck the trend with a 16% year-on-year increase.

Herd health has generally improved in nearly all areas. Mastitis cases have decreased to an average of 26 cases per 100 cows, indicating better management, facilities, breeding and recording, says the report.

But lameness has seen an increase which, having declined annually since 2020, jumped by four cases per 100 cows to 37. This is likely due to poor weather in 2023/24 affecting grazing access and leading to longer housing periods.

Fertility trends have returned to normal following the hot summer of 2022/23. The cost of an extended calving interval has dropped from £5.89/day per cow to £4.88/day – mainly due to lower milk prices and feed costs.