National Consultancy Manager Nigel Davies says dairy farmers need to consider planning and acting now to help insulate their businesses.
Prepare for a cash pinchpoint in the first half of 2019
Rising costs and a pressurised milk price will hit cashflow. Work out what it will mean for your business. Factor in an increased tax bill resulting from the higher profit achieved in 2018 to fully understand the cash demand on the business. With banks now looking more sharply at full farm viability, put adequate cash facilities in place in good time, being proactive rather than reactive. This process could take longer than you expect, so reduce the pressure on yourselves by starting it early.
Just as producers should have a monthly supply and demand budget for the cash resource that their business needs, they should have the same for their forage, planning how to rebuild stocks with a strategic reserve that is ready for the next late spring or dry summer. Think about managing risk.
Plan now for reduced support payments
In all probability, we know they are going to change and could potentially wipe out 1.91ppl, which is the value of all support payments to the average producer in the sample. So the sooner you start adapting the better. To recover the 1.91ppl through feed efficiency would require the average farm to reduce feed rate by 0.08kg/l, achieving the same yield from 0.28kg/l – a 22% reduction. Realistically a number of additional efficiencies will be needed to fully recoup this potential loss.
Where else can you drive further efficiencies
There remains a wide disparity in the quality of calf management, youngstock management, milk quality and herd reproductive performance, all of which impact hugely on profitability. Challenge what you do now, set improvement targets and monitor performance. Small changes soon add up.
Think labour management
The RABDF survey shows that labour will come under increasing pressure. Being a good people manager could be the difference between having someone to milk your cows or not. What can you do to build a more effective and skilled team? Staff management is an overlooked skill and must embrace training and development, delegation, motivation and communication of everyone in the team. And don’t forget the external members of the team. The better producers work more closely with their vets, consultants, contractors, accountants etc. than the average and there is room for most producers to improve in this area.
Implementing changes and improvement can take time, but they happen most successfully when businesses have the best possible financial information to hand and are prepared to regularly step back from their businesses and take an alternative view.