The AHDB has warned that rising feed prices could see more milk producers opt to reduce production, despite stable milk values.
The levy board says its milk to feed price ratio for the average GB producer is trending to the level at which milk output has historically contracted as dairy farmers review their purchased feed inputs to manage costs.
The average milk: feed ratio is 1 :1.15, the lowest since spring 2019, save for a brief dip at the height of the first lockdown in spring 2020. However, those producers on non-aligned fresh milk or manufacturing contracts have been in the “contraction zone” for most of the last two years, while suppliers to the cheese sector saw their ratio fall to 1: 1.10 after the first lockdown last year.
“Farmers will welcome recent milk prices increases, but these have been countered by a marked rise in feed prices,” notes AHDB lead analyst Patty Clayton. “When our milk to feed price ratio drops below 1.15, concentrate use is often reduced, leading to a fall in overall production.”
Ms Clayton says the average milk to feed price ratio is currently above that cut-off point but adds that the use of average farmgate price masks the situation faced by individual farms. The non-aligned and manufacturing milk market suppliers have seen a widening gap in farmgate prices and a low milk to feed price ratio for some time.
AHDB senior knowledge exchange manager Steve West adds: “With feed and forage accounting for over 40% of cash costs, any rise in input prices can have a major impact on dairy farm margins. Equally, it presents a big area of opportunity to make efficiencies on farm.”