Milk sales - We sell our milk to Marks & Spencers. The formula to compute the milk price paid is complicated and is confidential. For the year 2018/19 we are assuming we will receive an all-in price of 30.50 pence per litre (ppl) for all of our milk sales. This compares with 30.38 ppl we received in 2016/17. Combine this new price projection with our budget for milk sales of 3.154 million litres (2.68 mm litres in 2017/18), which is based on three time milking starting on 1st May and building up to a peak within six months, and we are projecting total income for this current farm year of £962,000 (£815,000 in 2017/18).
Livestock sales - Through 2018/19 we are forecasting £57,000 of income through the sales of livestock, net of the cost of unplanned culls. This is the equivalent of 1.82 ppl of milk sales.
Other sales - In 2018/19 we are forecasting miscellaneous income totalling £37,000, this coming mostly from the Rural Land Payment of £25,000. The balance comes from the sale of wood and equipment sales.
Operating costs - Today, we are budgeting total costs of the year for the whole business of £1,073,000, of which the dairy business will account for £983,000 (92%). Of the dairy costs, 48% will be accounted for by feed, including crop costs. While the milk price has declined over the past year, so has food prices. 22% of dairy costs will be accounted for by labour costs. It is important to note that these labour costs are all in. Some farmers believe that our labour costs are high, but first we have a policy of looking after our staff and housing them well and secondly many farmers do not include personal salaries and what are called "drawings" in their costs.
Depreciation - Capital investment is written off or depreciated over a period of time. Depreciation is important as it allows the investor to recover its money before replacement is required.
Since 2009, we had spent £4.16 million on the farm redevelopment, of which £2.09 million was spent on property, namely buildings. A further £2.07 million was spent on plant & machinery, mainly related to the fitting out of the barns, the installation of waste disposal equipment and the investment in tractors and related equipment.
We have some £2.47 million of tanginble and intangible assets (almost all tangible) associated with the farm.
Overall, this gives us depreciation of some £166,000 per annum, of which some £133,000 is probably attributable to the Dairy business. That is the equivalent of 4.21 pence per litre of milk sales.
Land and Buildings - 0% - 10% straight line
Plant and Machinery - 20% reducing balance
Tractors - 15% - 20% reducing balance
For 2018/19 we are budgeting investing some £33,000 on the farm, mostly on equipment. Other investment is required, but the economics of our business cannot justify this.