Low input system returns investment much quicker

HIGH input, high output milk production systems benefit everyone apart from the farmer, according to a debate on different dairy farming practices.

While farm manager Richard Rhone argued high input systems were essential to meet all-year-round demand for milk, fellow dairy farm manager Bill Jewell and consultant Mike Houghton argued he was helping consumers and retailers but not himself.

With 400 cows in Wareham, Dorset, averaging 9,000 litres, Mr Rhone said his costs were 25.58ppl, compared to Mr Jewell's 900 Holstein Friesians, Ayrshires, crosses and pedigree Jerseys averaging 4,500 litres at 23.2ppl.

Reducing costs

Both were planning to reduce costs (Mr Rhone by introducing red clover to silage leys, cutting water costs and using slurry better, and Mr Jewell by breeding 'aggressive grazers', upping the stocking rate, improving the soil and tightening the calving block). But Mr Houghton, a partner with Andersons Midlands, said each was in line with national figures for high and low input systems.

However, he argued, although the contrast was significant for cost of production, there was a bigger gulf if you looked at the investment needed to establish the two systems to generate a return of £65,000 before rent and finance - see table below.

“These numbers are only indicative but what is clear is that it is easy to spend a great deal of money, especially if a very high tech/high input approach to dairy farming is adopted.

Pay-back period

“If this investment is reviewed over 20 years, the low input system has a pay-back period of 13 years and achieves an internal rate of return of just over 5 per cent.

“The high output system does not generate a return on investment in the first 20 years - and this is the case even if a 1ppl milk price differential is assumed, to allow for the volume bonus.

“To achieve the same level of return, the high output system requires a minimum price advantage of 4ppl.”

Offering a price advantage to high input units offering a level profile is something Mr Rhone implied. He said retailers needed to understand the pros and cons of different systems and the higher cost of production if they wanted milk all year round.

He said retailers also needed information about the necessity of, for example, housing for a longer period, so they could pass information onto consumers to explain what was necessary to ensure UK, quality assured milk was available every day.

“One of the most important things about doing what we do is the retailer needs to understand it,” he said.

Less concerned about meeting the demands of the supermarkets, Mr Jewell concentrated on the pleasure of working in his low input system. Having previously worked on a high input unit, he said his cows were now less stressed with less mastitis and lameness.

Although calving time was very busy, the hours were more sociable for the rest of the year, meaning his staff were happier and he got to spend quality time with his sons.

Register your email address for Farmers Guardian e-bulletins

Get the latest from Farmers Guardian delivered straight to your inbox. Click here to sign-up today

Already receiving bulletins? Sign-in to edit your preferences