STILL THINKING OF Expanding?
Promar Senior Consultant Andrew Suddes considers whether herd expansion could still be on the agenda
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For any business there is probably no right time to expand, particularly as we are now more exposed to global markets and the prospect of having to live with greater price volatility. There will be better times, or possibly more fortunate times to expand, but predicting when these will be is far harder. So what all businesses must do is plan the expansion carefully so they can minimise the risks along the way and understand the potential impact of price movements on
hen Promar carried out a survey at Livestock 2014 the results showed that most surveyed farmers were looking to expand their herds within the next five years. While about 20% were predicting fairly modest levels of increase, more than 40% expected to increase herd size significantly, with plans for at least 50% more cows, and in many cases plans to more than double current herd size. There is no doubt the downward movement in milk prices will have made many farmers review their plans and we would probably get a different result if we re-ran the survey now. Reduced incomes and downward profitability can have a significant impact on confidence and future plans. However, for many businesses having more cows can create a more robust business, better able to support the farming family. That said, expanded businesses have to be able to survive times of poorer prices as well as enjoy periods of better dairy farming profitability.
the viability of the business plan. Any investment or long-term strategic plan must be based on a sound understanding of your total cost of production. This provides the basis of your planning and sets the parameters of any investment which in the short-term will inevitably add cost to the business. Also, you need to appreciate the effect the investment will have on your costs. Will it increase them in the long-term, or help to reduce them on a unit basis? For example, installing a new parlour will always add cost in terms of depreciation and finance, but if more cows can be
46 THE JOURNAL FEBRUARY 2015
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