Benchmarking your Farming Business
The DGCL Benchmarking Figures for 2016/17
We have recently analysed all the year end accounting information that we have available for businesses with March 2017 year ends, and updated our average and lowest 20% CoP figures for benchmarking purposes. The data is derived from a mixture of long standing clients and new businesses we have started working with in the last 12 months.
As you might expect the range in the costs per litre we see are massive. Total costs* range from 20ppl to 35ppl. The results indicate the direction of travel needed to ensure a viable and competitive cost base.
No surprise: Our goal is for all our clients to achieve costs* of 25 ppl or less.
* Total costs expressed on a comparable farm basis, i.e. after drawings and before rent and finance
Your Data:
If you sent data in, a copy will be sent to you comparing your result to the average and top 20% clients, i.e. the 20% with the lowest production costs. Given the variation in milk price, profit per se is not a fair comparator. We can discuss these in further detail with you and the implications for the development of your business during your next farm consultancy visit.
Farm Benchmarking Summary:
The farm analysis is summarised below:
| Lowest 20% CoP ppl | Average ppl | |
| Output | 27.28 | 30.20 |
| Variable Costs | 11.64 | 14.54 |
| Overheads | 11.31 | 13.97 |
| Total Costs* | 22.95 | 28.50 |
| Comparable Farm Profit | 4.33 | 1.69 |
*Costs incl. drawings but exclude rent & finance
Good profit per litre and overall are being achieved by farmers, regardless of the system they use and the figures show that the range in costs for any given yield level is huge. Here are some helpful points to consider when benchmarking your farm:
- Profit is achieved through cost control and efficiency, not simply output.
- Technical efficiency and effectively exploiting quality forage is vital.
- There is a massive range of milk prices, from 19.70 – 34.04 ppl
- Total variable costs range from 8.99 – 19.95 ppl
- Total direct overheads vary from 11.15 – 19.39 ppl
- Rent & finance costs range from 0.45 – 4.45 ppl.
- Total cost of production varies from 21.17 – 40.32 ppl
Interpreting the Figures:
Many individual costs cannot be looked at in isolation. For instance, a farm with a high staff and machinery costs are likely to have very low contractor charges (but not always!). And some with very high contractor charges should have exceptionally low machinery repairs and depreciation charges. These interactions are fascinating.
High depreciation costs may reflect investment in new facilities rather than reflecting a high machinery replacement costs.
Summary Charts
A massive range in milk price as evidenced in the summary charts here, but also, we see a very wide range in production costs.
Cost control and efficiency plays a massive part.
Interactions between milk price, costs, scale and yield are looked at next.
Interactions Explored
| Not surprising that milk price had a big impact on profit, but the cost structure has a bigger part to play, as see in the range of profit achieved across the range in price. | Again, a huge range in overheads. (Overheads includes drawings but excludes rent and finance.) |
|
Milk volume did influence profit, but the range in profit for a given yield shows efficiency and cost control is more important than scale. |
Total costs impacted heavily on profits. The range at any given price is down to output. |
| The range in variable costs in the sample is massive, and has a huge impact on profit. |
Yield isn’t everything! Efficiency is! |
Our Lowest Cost Client:
Congratulations once again to Jonathan Joseph and Josette Feddes for achieving the lowest costs we have surveyed this year. They have genuine costs of 21.17 ppl on a comparable farm basis.
Jos & Josette operate a grazing based system with 250 cows yielding approx. 7500 litres. Cows calve in 2 blocks (12 weeks in autumn and spring). Their spend on purchased feed is low at 4.4ppl and vet spend just 0.27ppl. Impressive performance on a heavy wet farm.
Over the year, variable costs increased by 1.5ppl reflecting the need to purchase forage, thereby allowing the herd size to increase. The additional output further diluted overhead costs by 1ppl.
Jos & Josette are contract farmers for the Parry Family at Lotmead Farm, Wanborough, Swindon in Wiltshire. They receive a monthly contract fee to provide all the staffing and machinery costs required, and a profit share at the end of the year.
Josette has recently started a milk retail business selling pasteurised milk via vending machines and has been featured in the local press. Hence the excellent shot of the family!
Lotmead Farm Summary of Results
| Lotmead 1617 ppl | Top 1516 ppl | Average 1617 ppl | |
| Output | 23.27 | 21.33 | 30.20 |
| Variable Costs | 8.99 | 7.43 | 14.54 |
| Overheads | 11.72 | 12.77 | 13.97 |
| Comparable Farm Profit | 2.56 | 1.13 | 1.69 |
Jos and Josette have been at Lotmead for around 8 years and have always farmed this way. They adopted the system established by Norman Parry and refined it; never losing sight of the importance of grazing and cost control.
We congratulate them on their achievement, in creating a truly robust dairy business.
Want To Explore Your Business Results?
Please do get in touch - we'd be delighted to help. Benchmarking is just one step towards building profits. We have huge experience developing dairy businesses by combining technical and business solutions.
100% independent, 100% for you.
Call Douglas Green on 07970 942666 or email: douglas@douglasgreenconsulting.co.uk