Liquidity pressures will vary by system


While the cash costs of production increase for all dairy farms, they will be felt in different ways depending on the system you operate.

Fall block and year-round calvings will be most exposed to rising feed prices. On the other hand, spring block calving systems are subject to higher fertilizer costs given their greater reliance on grazing.

The relative share of fuel cost in budgets is similar across all systems, as it relates more to equipment than fuel systems.

Currently, the greatest pressure on cash will come from fertilizer purchases for those who did not buy in advance and need to buy now. Despite the high costs, it may still be viable to apply fertilizer to some grasslands to maximize grass growth. You can assess whether it is worth buying fertilizer using the AHDB cost-benefit calculator for grasslands.

For most dairy farmers, higher milk prices will help offset higher cash outlays. Between January and Aprilaverage milk prices on market-linked contracts increased by 4.0 to 6.0 ppl (inc

Retail-aligned contract prices, which are tied to production costs, rose much less. Announced increases totaled between 0.8ppl and 1.43ppl in the first four months of 2022. Sainsbury’s has moved to monthly reviews, while Tesco’s next quarterly adjustment is due in May.

Due to the use of 6 or 12 month moving averages of input costs, they have not yet taken into account the full impact of rising costs and have not kept pace with rapid increases in the cost of inputs . market value of milk.

Later in the year, the impacts of reduced fertilizer use on cereal crops this spring, whether due to high cost or lack of availability, will translate into higher feed prices for animals in the livestock sector.

During the winter months, food costs take up a greater share of expenses, and there is little prospect of falling prices. At this point, cash flow could be reduced again, although the severity will depend on the ability of milk prices to keep up with rising costs and the success of silage production over the summer.

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