Decisions4Dairy - Cost of production: Implications of switching calving pattern

Implications of switching calving pattern

According to AHDB analysis, switching away from all-year-round calving (AYR) can typically offer savings of 1-3ppl. However, farmers shouldn’t undertake the move lightly. There are significant costs involved with the switching process, including an immediate need for capital and an impact on cash flow.

For an individual farm, AYR calving and block-calving will deliver significantly different milk production profiles. Assuming a typical 1m litre farm, the general milk production profiles from the three systems are shown below. These are based on the typical calving patterns seen from farmers already operating those systems, although the actual pattern achieved will be highly individual.

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The shift in milk production for block calving herds will deliver a more seasonal revenue stream at farm level. Most on-farm costs are not significantly impacted by the day-to-day movement in milk volumes. As a result, farmers moving to block calving should expect to have a number of months in the year when farm costs significantly exceed farm income. This impact on cashflow needs to be carefully planned and managed.

As well as impacting milk production volumes and cashflow, calving patterns can also have a impact on milk compositional quality. Typically, we see spring herds return higher compositional quality, compared with AYR and autumn herds. This is achieved through higher use of forage, but also those operating spring-calving systems are more likely to be using a breeding programme selecting for higher solids. The higher quality can often help to offset any seasonal penalties imposed by milk buyers.

Taking a typical farm on each system, we can use the AHDB Milk Price Calculator to give us an indication of the impact on milk revenue. Using June’s information, suggests the following impacts on milk revenue, for farmers looking to switch from AYR to block-calving:

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                                                                                        Source: AHDB Milk Price Calculator

For aligned and liquid contracts, many milk buyers are reluctant to encourage block-calving because of the desire for an overall flat production profile. As a result, milk returns tend to be slightly lower on block-calving systems compared with AYR. However, the spring-calving system does appear to return a slight premium due to the higher butterfat levels offsetting the seasonality payments for some liquid milk buyers. Other manufacturers are more tolerant of block-calving systems, and returns appear to reflect that.

Apart from milk buyer requirements, there are a number of other factors to consider before switching calving system:

-          Does block-calving suit your lifestyle?

-          Can your buildings and parlour cope with block-calving?

-          Do you have enough space in your bulk tank to cope with the higher peak?

-          Do you know your costs of production?

-          Do you understand the cash-flow implications?

-          Do you understand the capital required to achieve the change?

Block-calving systems are not suitable for everyone, however, the potential financial benefit is great enough that farmers should at least ask the question. Farmers considering switching should use AHDB tools that can help assess the options:

  • The Milk Forecasting Tool allows you to see how much changing your calving profile and lactation curve will impact monthly milk outputs to assist with building a cash-flow forecast
  • The AHDB Milk Price Calculator allows you to input your milk profile from the forecasting tool above to see the impact on revenue, based on your own milk buyer and contract. Don’t forget you typically see an increase in milk quality that should be factored in too. Please speak with your milk buyer, wherever possible, before making significant changes
  • A factsheet on autumn block calving from Farming Connect will give you further insight to the changes seen on farm and elements to consider
  • When looking at comparing a change a quick way of doing this would be a partial budget, our template will help you set this out. The profit and loss account template will help you look at whether a change to block calving would help the profitability of your business. Remember to use a 5 year average when looking at prices – (link to longer term planning article from Neil that will have been released earlier in the week)
  • Our cash-flow template will help you to build a forecast cash-flow. It is prudent to look at the time during which you are changing system as well as when the change is complete to identify periods where funding support may be required. For more information on budgeting financially and physically click here.