Temperatures might have slipped a few degrees, but the continual dry, hot, balmy weather could still have serious ramifications for dairy farmers in terms of milk supplies and costs of production.

While some areas have welcomed much needed rain over the past fortnight, many are facing what is turning out of be one driest years in more than a quarter of a century. Add to that increasing costs of production which are expected to rise 1-3ppl, any any potential profits will be wiped out, driving many farmers into loss making situations, according to Paul Macer of Kite Consulting.

With the heatwave/dry weather forecast for at least another week, especially in the south, Kite Consulting, has developed three possible scenarios for how the drought might unfold over the coming months. Mr Macer has also looked at the subsequent impact on costs of production of the three scenarios and how a rise in the cost of production could affect milk supply.

To date, he said milk supply is holding up reasonably well, and is only falling marginally quicker than normal, as the industry heads towards the annual trough in production. However, with many farmers already dipping into forage supplies, he said there could be potential issues for later in the year.

"Already producers have introduced contingency plans, but these are adding cost into systems," said Mr Macer. "Anecdotally, we hear that feed mills are running much closer to winter capacity than would normally be seen at this time of year. Many farmers have also taken cereals as wholecrop instead of combining them to put some bulk into the clamps.

"Again, this has implications on costs as the grain and straw will now have to be purchased. November LIFFE wheat futures are currently more than £165/tonne (up £20/tonne on the same week last year) and standing straw auctions have reached more than £200/acre and on average are £40/acre up."

Kite Consulting has looked at various scenarios based on when the drought breaks, what that means at farm level and how it will affect the cost of production going through the winter. The assumptions are shown along with a percentage probability. The weightings given to the various scenarios are based on the precipitation models which indicate lower than average rainfall throughout Q3 of 2018.

Scenarios:

1 – Weather breaks significantly in second half of July – 5%

2 – Weather breaks and goes back to 'normal' in August – 55%

3 – Weather doesn’t break until late August/September – 40%

Scenario 1

• Difficult conditions for the next few weeks until grass gets back on track

• One cut of silage lost and some stocks eaten

• Grazing recovers from mid-August

• Maize will recover and yield well

• Possibility of late cuts of silage to replenish stocks

• Wholecrop silages have helped stocks

• Higher concentrate feeding rates to date

• Minimal impact on milk production

• Impact on cost of production 1ppl

Scenario 2

• Silages already made will be fed early

• Maize drought stressed and will only partially recover reducing yields

• Loss of one to two cuts of silage

• May get one cut late to replenish some stocks

• Straw/bulk feeds will continue to increase in price

• More concentrates fed to counter reduced forage supply

• Milk flows affected from the autumn as spring calvers dry off early and more traditional units struggle to maintain output

• Impact on cost of production 2ppl +

Scenario 3

• Minimal forage going into winter

• Grass silages fed through summer and no later cuts to replenish stocks

• Maize crops struggle and yields reduced by 25% or more

• Significant forage dry matter replaced by concentrates/straights/bulk feeds

• Issue with bulk feed supplies due to demand from AD plants

• Bedding costs increase dramatically (straw)

• Unless milk prices continue to increase milk flow will be affected – passengers culled/early drying off

• Autumn block calvers potentially less affected as long as forage is in place - these cows will now be drying off and therefore having little impact on milk flow

• Impact on cost of production 3ppl +

Mr Macer added that normally a milk price to feed price ratio of 1.2:1 is the point at which producers feel more confident to increase feed rates to produce marginal litres, and with concentrate prices likely to be in the £240-£250/tonne range this winter, that requires a milk price of at least 28-30ppl. However, farmers are in the unusual position this year where concentrate will be required to make up the forage shortfall and therefore the normal rules will not apply.

He added: "A concentrate price of £240/tonne as delivered to the farm equates to £280/t of dry matter. Conserved forage would normally be valued at £120-£130/tonne of dry matter. Therefore, every kg of substitution adds 15-16p to the daily cost of keeping the cow. A fairly typical winter diet may contain 12kg of forage DM and 6.9kg of concentrate DM (8kg fresh). Substituting 2kg of forage DM with concentrate would add at least 30p/cow/day or 1.2 ppl for an average yield of 25 litres.

"The shortage of forage has ramped up forage costs on the open market. Standing wheat has been changing hands at £800/acre for wholecrop. Add £60/acre for harvesting and we are looking at £180/t DM for extra forage that has to be purchased to make up the shortfall," said Mr Macer.