Sizeable gap in profit margins, figures show

The milk price in 2013 averaged 40c in profit monitor results compiled by Teagasc.

This was 7.5c higher than 2012, but the average net profit margin in 2013, at 15.3c a litre, was only 4c higher than 2012 due to fodder problems.

The top 10% with profit monitor results saw a price of 41.2c; the lowest performing 10% had a milk price of 39c.

Stocking rate on the top 10% averaged 2.3 LU/ha and 2 LU on the lowest 10%. These stocking rates are similar to other years.

Milk yield per cow averaged 5,300 litres in the top group, 4,866 litres in the lowest group.

The top group also had a superior milk solids percentage.

Feed costs were 5.2 c/l in the top group and 9c/l in the lowest, reflecting fodder scarcity on lower-performing farms.

Total variable costs per litre, a useful measure of performance, were 12.3c/l in the top group and 18.6c in the low group. As a result of the lower variable costs the top group had a 30c/l gross margin, 50% higher than lowest group. Fixed costs on the top farms at 7.2c/l were only about half those on the lowest group.

As a result of the difference in costs, the top group had a net profit margin per litre of 22.9c and the lowest 6.7c.

Thus the top group was more than three times more profitable than the low group.

Net margin represents returns to labour, capital invested, and land.

These margins are higher than for average farms because farmers who complete the profit monitor are likely to be the more profit focused.


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