Time to benchmark your costs
Having recently reviewed over 700 eProfit Monitors, Dairy Specialist at Teagasc, Patrick Gowing reminds us why dairy farmers need to keep a firm focus on the key drivers of profitability for their farm businesses.
Recently we reviewed over 700 eProfit monitors and ranked them on their profitability. We wanted to investigate what caused one farmer to be more profitable than the next. The range in profitability per cow was €1,140 from the top 10% to the bottom 10%. On a 100-cow herd, this would equate to a €114,000 difference in total profitability.
The difference in profitability between the two groups can be accounted for under two separate headings.
Gross output
The top 10% had a higher output, with similar stocking rate and concentrate feeding. The increase in gross output was down to two factors. The top 10% achieved a higher milk price due to better milk solids, reflecting the benefit of better genetics in the herd. This equated to over €200/cow against the bottom 10%.
The balance of the increased milk produced can be explained by the cows eating more grass dry matter (DM) than the bottom 10%. As we mentioned already, meal feeding rates and stocking rates were similar in both datasets so the extra output was achieved by more grass being fed to each cow.
This was achieved by firstly growing more grass; you can’t utilise the grass if you don’t grow it. Having the appropriate paddock size is also key. In some cases, the herd size has increased beyond what the paddock system was designed for. This means, to get residency in the paddock, the cows are offered higher pre-grazing yields, which will reduce intakes and performance. Finally, targeting 1,300-1,400kg DM/ha pre-grazing yields as often as possible will increase your grass utilised per cow.
Cost control
Half the difference was explained by gross output and the other half was explained by cost control. While the average figures are useful to use for field days and farm walks, in reality it is hiding what is happening with cost control on farm.
The variance in all costs across farms is massive. It is not where the average is but where you are compared to the average that is important.
Since 2015, we have seen a year-on-year increase in costs. This obviously rapidly increased in 2022 and has stayed high for 2023 and 2024. What we see in the figures is there is ~€570 difference between the costs of the bottom 10% and top 10%.
In the past, we have focused on meal feeding costs and fertiliser and these are still important as they make a large part of our total production costs, but they do not explain the majority of the difference in costs.
Take vet costs as an example. On average it costs €89/cow on the eProfit monitor. The range, however, is from €50/cow to over €140/cow, or a €9,000 difference per 100 cows. A similar story can be seen with nearly all other costs.
All farmers need to benchmark their costs to see where they are. In any year, there can be a genuine reason why a cost may fall out of line. But if it is continuously over the average, this needs to be looked at and addressed.