Dairy farmer labour: the true costs - RABDF study findings

RABDF is urging all dairy producers to include from now on the value of family labour in their farm accounts in order to calculate and standardize the true cost of milk production. A detailed study conducted by the Association concluded that family labour costs 3.81p per litre.

Called 'Identifying the True Costs of Farmers' Own Labour', the study has quantified for the first time ever, the contribution family labour makes to a dairy enterprise and its real value. Five hundred dairy farmers were included with an average herd size of 156 cows and yield of 7,112 litres. These herds were essentially family run with an average 3.62 people, the farmer worked an average 57 hours per week, and 64% of spouses and 42% of sons or daughters were involved in the business.

This RABDF study, focused on each individual's time spent working on the farm and the tasks carried out. The responses were analysed by an independent human resource specialist to benchmark dairy farmers' skills and responsibilities against jobs in other industries. The salary levels of the benchmarked jobs were used against a national database to establish appropriate standardized salary levels. This benchmark information can in future be updated to account for salary inflation.

RABDF determined from the study that the average cost of family labour to run a technically efficient, average size dairy enterprise amounted to £42,241*, the equivalent to £271 per cow or 3.81p per litre. On a 150 to 200 cow unit, family contributions added to hired labour pushed up the total labour cost to between 5.5p and 6.0p per litre.

“We had been concerned in the past about statements saying producers could make a profit and have sufficient cash to re-invest at a milk price as low as 16p per litre,” says RABDF chairman, Tim Brigstocke. “The Association investigated those figures and found that the crucial value of labour had not been recorded in the accounting process, therefore farmers themselves were subsidizing the real cost of production.

“The Association responded two years ago by launching the RABDF Independent Guidelines for Dairy Costing Schemes in cooperation with the dairy costing companies and used an arbitrary figure for labour of £10 per hour. Our latest study, Identifying the True Costs of Farmers' Own Labour is the final piece in the jigsaw. The study quantifies for the first time the true labour value of farmers and their families and we are now urging them to include these substantial figures as an item in their dairy costings.”

He adds: “The costing companies have already embraced our standardised approach and RABDF hopes the wider industry, including accountancy firms, will accept this latest data and fully understand the real role and financial value of family labour. RABDF is also working to ensure the true costs of milk production are understood by the entire dairy food chain including retailers, processors and Government.”