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want, when they want it and the specification they require, such as milk quality could have an influence on your plans. The last thing you should do is surprise your customer with a fait accompli about increasing production.
Understand your costs
Invest the time in working out your true current cost of production and benchmark your performance against other herds. This will help you identify where efficiencies can be made and provide a sound foundation for budgeting the new system. Assess all the options and build a plan
If you decide you still want to consider expansion, don’t rush into one option, but look at a range of options. This will include not only the eventual herd size, but also the stages along the way. For example, is it better to grow steadily using home reared animals or do you buy cows to get numbers up quickly.
Both approaches have their pros and cons, so it is important to consider which is right for you. What are the practical implications and what is the impact on cashflow and working capital requirement? If you are borrowing money the bank will certainly have a few and expect to see that several options have been assessed.
Be realistic Don’t assume you can have more cows and automatically increase yield and reduce feed use. Even if you are confident that your expanded system will support higher performance due to factors such as improved cow comfort, better feed access, improved forage quality, superior genetics or whatever, there is no guarantee this is the case. Equally there will be a time lag while performance does improve.
I advise anyone who asks about expansion that the plan must work at current performance levels as this is what your track record says you can achieve. Maintaining performance with increased numbers can be a considerable achievement. Any increased performance is a bonus. Your plan must work at lower milk prices. Based on costs of
Maintaining performance with increased numbers can be a considerable achievement
production, work out your breakeven milk price and decide in how many years this is likely to be exceeded increasing the likelihood that you will make a profit. Where are the risks and how can they be mitigated? Your bank will want to see that you have plans for all anticipated risks.
’ Consider all the angles
The old adage is that proper planning prevents poor performance. Take the time to fully assess all aspects of the plan. For example, what are the implications for staffing? How many staff will you need and with what skills? Do you need to train current staff? Do you need to recruit staff? How will you retain them and what is your risk should staff leave? What are the consequences for NVZs and slurry storage? When you are modifying the existing system what are the practicalities for cow flow and grouping etc.
Where will the extra animals come from? If home reared, what is the knock on impact on cashflow of reduced calf sales etc. The aim should be to leave nothing to chance.
Take advice
Planning can be a legislative, political and emotional minefield, dealing with local authorities, The Environment Agency and possibly local area pressure groups. It can be incredibly difficult to handle all of this while still trying to run the existing business with all that entails. Taking advice at all stages can help smooth the process, spread the burden and increase the chances of success. It also means your plan will be challenged every step of the way resulting in a more robust final option.
Despite the current milk price situation, many dairy farmers will still be considering expansion and hopefully will go about it in such a way that they implement a sound, long-term solution for their business.
LEFT Planning expansion graph. 48 THE JOURNAL FEBRUARY 2015
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