7 STEPS FOR IMPROVING BUSINESS RESILIENCE IN CHALLENGING TIMES
By Duncan Williams, Vet Nutritionist for MoleCare Vets
As dairy farm businesses face unpredictable commodity prices due to Brexit, Covid-19 and war in Eastern Europe there are various steps they can take to ensure they come through this current episode in as strong a position as possible:
- Understand how your costs are related to your margin. The inflation in prices we have seen is across the board. While some specific prices have surged ahead, almost all markets now include an uncertainty premium. So, both input and output prices are up in most cases. This requires us to take cost of production analysis beyond just looking at cost reduction. You need to understand how different costs impact your outputs. Cutting back cake, turning cows out, and taking a yield drop might be the best option for many. However, if those marginal litres are what is keeping the business in the black then it would be prudent to keep them flowing.
- Cash is king. With unexpected changes around every corner, maintaining cash flows will be essential. Budget future outgoings and understand the impact of these price rises. Speak to the bank early once pinch points have been identified. Changing farm systems, such as moving to block calving or moving away from a flying herd can be especially cash hungry so consider this pressure before setting out on these paths.
- Expect disruption. Until supply chains have adjusted, many inputs will be in very short supply or completely unavailable. Plan for long lead times on delivery and understand what your plan B is if a certain product is completely unavailable. Talk to your suppliers to understand the current situation with them.
- Optimise your inputs. With protein prices skyrocketing, lowering the protein content of rations through amino acid balancing, and feed-to-yield will save money without cutting production. Slurry and FYM have brilliant nutrient value so focus on using them efficiently; soil and slurry testing will mean you know how much additional fertiliser is needed. Slurry bugs can also increase the availability of nutrients to the soil and low emission spreading techniques will keep as much N as possible in the soil. When managing inputs, ensure you keep the long-term future of the business in mind. If body condition or fertility drops or heifers fall behind in their growth rates, that may have a long-lasting negative impact.
- Remove low production animals from the milking herd. Now more than ever, its essential we know which cows are contributing efficiently to our milk production. Each farm needs its own minimum criteria for remaining in the main milking herd. This might be the combined feed, forage, and milking costs divided by milk price. An example calculation is below:
- Forage: 35kg at 3.5p = £1.23
- Concentrate & Cake: 8kg at 35p = £2.80
- Milking: 2X at 50p = £1.00
- Total costs = £5.03
- Divided by milk price: 35p = 4L (corrected for fat and protein)
These cows are not necessarily destined for culling, although some may be. Turnout may lower their feed costs enough to return them to profitability. Drying them off will only save you the cost difference between milking cow and dry cow rations, so be wary. In both circumstances be careful with changing body condition towards the end of pregnancy as this might impact future lactations. Be aware that many milk contracts will soon be adjusting for seasonality on marginal production.
- Talk. Everyone is going through this crisis in their own way. Talk to your staff to understand how they are being impacted both financially and emotionally. Talk to your partner or friends. Share your concerns about the current situation and how it is affecting you. Build a team of friends and advisors around you who you trust. Remember that farming is an incredibly important livelihood, but you are not solely responsible for feeding the world; a problem shared is a problem halved. If you need someone to talk to there is always the Farming Community Network. Call them any time on 03000 111 999 or email: [email protected]
- Consider your options. The unique and challenging part of British dairying is that there are so many systems available to us. Each one has its strengths and weaknesses. While many farms have already made long-term decisions, others are on the cusp of change and looking for inspiration. If you are in this position, go and see as many farmers, and farm types as possible. Understand the options available to you and what systems may suit your land, your milk buyer, and your passions as a farmer. There is a chance that there will be even more turbulent times ahead. Being able to adapt to these changes will be an increasingly important skill. What is certain is that farming will remain as essential as ever, and Britain will remain a fantastic country in which to make milk.
Duncan Williams has joined Mole Valley Farmers in a new role helping farmers to navigate the climate change challenges ahead.
You can also contact him on Tel: 07977 054 328 or [email protected]