Dairy farm profits set to halve this year

Profits on dairy farms were forecast to plunge by more than a half this milk year, as lower prices and stubbornly high costs combine, warned accountants Old Mill and the Farm Consultancy Group at this week's Dairy Show

clock • 1 min read
Dairy farm profits set to halve this year

The pair expect average profits to fall back from a record £914 per cow in the 2022/23 milk year to £415 in 2023/24, although that would still be £44 more than in 2021/22.

Higher input costs meant costs per cow rose by 38 per cent between 2021/22 and 2022/23, although milk income rose by 56 per cent, delivering profits.

The figures do not include rent, interest, drawings, tax, capital expenditure or basic payments, but do include a labour charge of £30,000 per full-time partner or director. They are based on clients with a year-end of March 31 2023.

See also: Latest milk prices for dairy farmers

"With interest rates at five per cent or higher, basic payments declining, and extra investment required to comply with water and environmental regulations, there is a cash squeeze looming," said Annabel Hole, rural administrator at FCG.

Dan Heal, rural accountant at Old Mill, said: "Larger, higher yielding herds were more suited to the market conditions of 2022/23.

"These systems typically perform well in times of high prices, although have high cost bases for when prices fall."

In 2022/23 the top 10 per cent of performing herds made an average profit per cow of £1,668, while the bottom ten per cent made just £187/cow.

"Farming efficiently relies on the farmer and is not based on the system which is run. We're confident that producers who manage their businesses effectively will be able to weather the more difficult periods as well as take advantage in the good times."

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