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that it wants less milk to be produced. Reducing “B Litres” where applicable is of massive importance.
If we assume a heifer is calved on a farm which is already selling B Litres:
In winter months a target of at least eight litres should be aimed to be produced from forage/cow/day.
8p a litre, with 3000 litres from forage. This is not easy to achieve for many, but crucial nonetheless.
Forage intakes are
fundamental to achieve this. I have been targeting an average eight litres plus from forage / cow / day for all herds during winter months and an average of 14l plus for all summer months. This is particularly important for those on milk contracts which have “B Litres” worth 10 – 15p.
LABOUR
Labour costs on average will sit at about 2.5p a litre, a substantial cost. Regular labour can often be reduced by streamlining the business, concentrating upon the core, margin generating areas only and using occasional / contract labour to fill in the gaps for the lesser-essential work as and when required. Any loss making enterprises should be stopped immediately, reducing labour accordingly.
STOCK LEVELS
It is important not to carry surplus stock on farm, particularly heifers. Rearing too many heifers to maintain the herd is a huge drain on cash flow, as is rearing non-dairy animals for too long. I suggest rearing no more than you need unless you’ve got a guaranteed route to market for better than market prices.
Milking less animals at the moment makes common sense. The market is telling farmers
7500 litres @ 14p a litre: £1050 Calf value: £100 Income = £1150
2.5t @ £200 / t: £500 Vet & Med: £75 Dairy Office: £30 AI / Semen: £35 Herd Replacement Cost: £150 Bedding: £30 8t silage @ £25 / t: £200 Finance £30 Cost = £1050
Margin = £100
With a margin of just £100, plus circa £1000 rearing cost, it simply doesn’t make economic sense keeping that animal. She is better off sold at calving and keeping the cash in the current account. It’s important to remember the fewer animals you keep the less labour, fuel, contracting costs etc… you will incur. Selling animals which are adding no / little value to free up cash is a sound strategy.
DEBT STRUCTURE
Debt structure is an important consideration regardless of the milk price. Capital repayment holidays/interest only is an increasingly common tactic to relieve some cash flow pressure. This is a sensible option and generally banks have been supportive of this as part of a wider cost cutting plan. The major lenders are more and more using cost of production in lending decisions. As a general rule of thumb those under 25p a litre are receiving good bank support, those over are not. Little could be done about
HP agreements already in place, however, this is not the time to be replacing or adding machinery. In fact it is worth trying to trim down on farm
machinery in order to bring down costs and ease the burden upon cash flow. I am urging clients to sell machinery which is unnecessary / under used.
Before undertaking any purchases or undertaking any farming activities you should ask yourself;
Does this lower my cost of production? If the answer if no, then it has no place in your business
I recommend the following mantra. Can I farm without it, if no, can I buy less of it and can I find it for a lower price? Remember whatever the job if it doesn’t reduce your cost of production don’t do it. For those who survive this crisis and adopt a low cost and lean business model and maintain it through years of boom the potential profits could be immense.
Labour costs on average about 2.5p a litre.
Rearing too many heifers to maintain the herd is a huge drain on cash flow.
Most of a dairy farmer’s costs are typically feed, forage and labour.
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