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4.5 NET MARGINS
Fixed Costs were recorded for 10 of the 50 participants.
4.5.1 WEIGHTED AVERAGE NET MARGINS
The information on fixed costs was combined with the individual units gross margin in order to provide Weighted Average Gross Margins and Weighted Average Net Margins for those participants were net margin information was recorded.
The weighted average gross and net margins are shown in the table below: -
Table 4.19 - Table Showing Weighted Average Gross Margins for the Dairy Enterprise
| £ per Cow | ppl |
|---|
Weighted Average Gross Margin | 794 | 10.37 |
|---|
Weighted Average Fixed Costs | 711 | 9.29 |
|---|
Weighted Average Net Margin | 82 | 1.08 |
|---|
The results show that the dairy enterprise made a weighted average net margin of £82 per cow and 1.08ppl for the year ended 31 st March 2007. This means that the average producer is operating just above breakeven with a herd of 205 cows (the weighted average herd size in the sample) generating £16,810 net margin. This is a poor return for the level of investment required by an enterprise of this type.
4.5.2 LEAGUE TABLE OF GROSS AND NET MARGINS
The tables below show the gross and net margin performance of the dairy enterprise ranked in order of net margin performance expressed firstly in as £/Cow and followed by ppl.
Table 4.20 - Table Showing the Weighted Average Net margin Performance Expressed as £ /Cow
Farm Reference | Gross Margin
£ / Cow | Fixed Costs
£ / Cow | Net Margin
£ / Cow |
|---|
DS10 | 1,400 | 932 | 468 |
|---|
DS55 | 1,150 | 752 | 398 |
|---|
DS20 | 796 | 419 | 377 |
|---|
DS26 | 665 | 505 | 160 |
|---|
DS40 | 638 | 521 | 116 |
|---|
DS17 | 598 | 538 | 60 |
|---|
DS11 | 690 | 696 | (6) |
|---|
DS6 | 563 | 941 | (378) |
|---|
DS21 | 663 | 1,052 | (389) |
|---|
DS34 | 852 | 1,343 | (491) |
|---|
Average | 801 | 770 | 31 |
|---|
Top Third | 1,115 | 701 | 414 |
|---|
Bottom Third | 693 | 1,112 | (419) |
|---|
Table 4.21 - Table Showing the Weighted Average Net margin Performance Expressed as ppl
Farm Reference | Gross Margin
ppl | Fixed Costs
ppl | Net Margin
ppl |
|---|
DS55 | 19.51 | 12.75 | 6.76 |
|---|
DS10 | 16.67 | 11.09 | 5.57 |
|---|
DS20 | 11.25 | 5.92 | 5.33 |
|---|
DS26 | 7.98 | 6.06 | 1.92 |
|---|
DS40 | 7.74 | 6.33 | 1.41 |
|---|
DS17 | 8.78 | 7.91 | 0.87 |
|---|
DS11 | 10.70 | 10.79 | (0.09) |
|---|
DS21 | 7.04 | 11.17 | (4.13) |
|---|
DS6 | 6.78 | 11.33 | (4.55) |
|---|
DS34 | 11.82 | 18.64 | (6.81) |
|---|
Average | 10.83 | 10.20 | 0.63 |
|---|
Top Third | 15.81 | 9.92 | 5.89 |
|---|
Bottom Third | 8.55 | 13.71 | (5.16) |
|---|
The fixed costs for the dairy enterprise varied between £701/cow and £1,343/cow or 6.06ppl and 18.64ppl. Giving a range in net margin of between £468/cow and £(419)/cow or 6.76ppl and (6.81)ppl.
This variation in fixed costs is huge with the most efficient units being able to operate at less than a half of the fixed costs associated the most inefficient units on a per cow basis and less than a third on a ppl basis. This coupled with the range in gross margin gives a range in net margin of £887/cow or 13.57ppl.
The ability to control fixed costs effectively is therefore a key issue in determining the profitability of the dairy enterprise.
The two organic units included in those submitting fixed costs (DS10 and DS55) had fixed costs above the average but still came out at the top of the table due to the high gross margin.
The farms submitting fixed costs occupied the top two thirds of the league table for gross margin. This means that the farms with the lowest gross margins were not represented in the fixed cost table above. If these farms had been included, this would have pulled the average net margin downwards.
Top third producers were the only group of participants that were able to return a meaningful net margin.
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