Dairy margins in the UK continue to fall and the worst has yet to come, according to Ian Powell, Director of the UK's Dairy Group.

A recent report published by the Dairy Group shows that the margin over purchased feed, a key performance indicator of dairy herd profitability continues to fall.

"Following 16 consecutive months of reduction since the peak of £1992 (€2,510) in May 2014, the latest results to January 2016 show an average margin over purchased feed of £1507 (€1,899) per cow.

"This is a reduction of £485 (€611) per cow, which is equivalent to £103,000 (€129,774) over a full year for the UK's average herd of 212 cows," said Powell.

But, despite the fall over the last 12 months, Powell said the worst has yet to come, with the spring peak in April to June likely to see a further reduction in average milk prices due to seasonal penalities.

"The milk price payment systems have become ever more complex and there is an urgent need for dairy farmers to properly understand how the milk payment system works and how to get the best out of a very difficult situation," he said.

He also urged milk buyers to provide dairy farmers with models to work out how the milk price is calculated.

Monthly average results for January 2016

Powell also said that the average January milk price dropped in the UK, down 3.2p/L (4.02c/L) on last year's levels to 23.8p/L (29.9c/L).

On a more positive note, the average butter fat of 4.20% was 7 points higher than last year, but milk protein levels dropped 3 points on January the year before to 3.31%.

The milk yield of UK dairy cows was also higher this January compared to 12 months earlier, up by 0.9L/cow. Milk from forage also increased from 1.4L/cow to 6.9L/cow this January, resulting in the average cost of purchase feed falling by £22/t (€28/t) at £197/t (€248/t).

Meanwhile, the monthly margin over purchased feed was £123 (€155) per cow, which was 8% lower than January the year before.

[caption id="attachment_113365" align="aligncenter" width="651"]a1a Source: Dairy Group UK[/caption]

12 month rolling average results

The report also shows that the rolling average milk yield has increased by 156L per cow compared with the previous year to 8,237L per cow.

It shows that the average UK milk price from January 2015 to January 2016 was down by 5.9p/L (7.43c/L). This is a drop of 19% resulting in the average milk price being 25.2p/L (31.75c/L).

The rolling margin over purchased feed was £354 (€446) per cow lower than a year ago at £1,507 (€1,898) per cow.