Knowing your cost of production

September 7, 2020

Being able to monitor your cost of production effectively will allow you to make active on farm decisions to decide what is making you money and what is not economically viable. From Davidsons we have tailored management packages available to our customers for free including dairy herd costings and sophisticated rationing software, meaning your ration can be tailored to achieve the most profitable and economical option.

Understanding your milk contract is key to increasing margin. How much margin could you gain through increasing your butterfat and yield?

Litres/cow

3.8%

4.0%

4.2%

28

0

£694

£1,389

30

£1,612

£2,356

£3,100

32

£3,224

£4,018

£4,811

The table above shows in a standard month, the potential profit gain or loss from the change in butterfat percentage and average litres. This illustrates how much can be gained or lost with the variation of butterfat and yield (based on a 100 cow herd over a month at 26 pence as standard litre, with a butterfat bonus of 4p per percent of butterfat). Is what you are doing working? Is it worth pushing for the extra butterfat? How much will it cost to boost your butterfat? By using calculations like these, you will be able to decide on whether or not it is cost effective to aim to increase your butterfat or litres.

Spend your money more wisely. By looking at the table, working out the added feed costs is just as important . For example, aim and achieve 32l at a butterfat of 4.2% from an average of 28l and 3.8% butterfat, through a spend of £20 per day you will achieve an increased profit of £4.211 per month, totalling to an impressive £50,532 over a year. Showing that cheapest is not always best.

When looking at winter rations this year, margin is key. Understanding your cost of production makes is much easier manage your spending in the correct places to increase margin. Looking at silage analysis results this season, silages are generally of high quality but low NDF, balancing your ration to your suit your milk contract has never been as important. Is it worth aiming for an extra litre?

Through understanding your milk contract and the use of Davidsons dietary planner, we are constantly calculating these figures into our rations. Ensuring our customers are as efficient as possible and achieve the highest margin over purchased feeds as possible.

Sam Hodgson

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