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Identifying the True Costs of Farmers’ Own Labour 2008

30 June 2008

RABDF is urging all dairy producers to revise the value of family labour in their farm accounts to 4.43p per litre, in order to reflect the true cost of milk production. An update on a detailed study conducted by the Association four years ago has concluded that family labour costs have increased by more than 16% during that period.

Called 'Identifying the True Costs of Farmers' Own Labour 2008', the document has brought up to date RABDF's original study in which it quantified for the first time ever, the contribution family labour makes to a dairy enterprise and its real value. The 2008 update took in 500 dairy farmers 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.

The 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 standardised salary levels.

RABDF determined from its latest study that the average cost of family labour to run a technically efficient, average size dairy enterprise amounts to £49,168, equivalent to £315 per cow or 4.43p per litre. On a 150 to 200 cow unit, when family contributions are added to hired labour this pushes up the total labour cost to between 7.2p and 7.9p per litre.

"RABDF has had a long term concern that the crucial value of labour was not recorded in the accounting process, consequently farmers themselves were subsiding the real cost of production," explains RABDF chief executive, Nick Everington. "We initially launched the RABDF Independent Guidelines for Dairy Costing Schemes in co-operation with the dairy costing companies, followed by the 2004 study to identify the true costs of farmers' own labour. Since then, we are more than aware that the cost of living has risen dramatically, and in order for a farmer to receive adequate reward for his labour contribution to the dairy he should now pay himself £16.70 per hour and revise his farm's labour costs accordingly.

"Furthermore, despite farmers receiving unprecedented milk price rises over the last nine months, they barely cover escalating fixed and variable costs, never mind leaving any surplus for reinvestment. Therefore we would urge all farmers to introduce the revised figures as an item in their dairy costings in order to demonstrate the true cost of milk production."

He adds: "The costing companies have already embraced our standardised approach as well as our original family labour value. 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 continuing to work to ensure the true costs of milk production are understood by the entire dairy food chain including retailers, processors and government."

Download the full report here

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