27 November 1998

Cut investment to survive

By James Garner

A SWITCH to spring calving is one way to cut investment and help dairy producers remain in business in 10 years time.

Irish-based grassland consultant Leonie Foster told producers attending a farm walk in West Sussex that in future there would be lower profits and less money to reinvest in dairy businesses.

At Jim Harrisons Dedisham Farm, Slinfold, West Sussex, 312 cows graze 170ha (420 acres) of grass, averaging 6300 litres.

"Our objective on this unit is to produce 2m litres of milk making labour more efficient. I am looking to achieve 10 seconds labour time for every litre produced."

Although profits declined last year, Mr Harrison continues to invest. A new parlour was built which has cut milking time by one-and-a-half hours, allowing an increase in herd size.

"We are an autumn calving herd, hoping to maximise use of spring grass, but I accept we could do more with grazed grass." Turnout into grazing paddocks at Dedisham is in mid-April, but grazing before this consists of 16ha (40 acres) of Italian ryegrass undersown in maize. "We managed six weeks grazing from this last year, which carried us through until we could graze the paddocks. Cows had a feed on the paddocks and were then brought inside on to silage, enabling us to cut concentrates from 6kg to 4kg.

"This system has worked well till now. But this years maize harvest was difficult and a lot of damage has been done to the undersown grass. I think we have only half the usual crop this year."

Looking at Mr Harrisons system, Ms Foster said he had made some good decisions in the past and his levels of profitability and efficiency were impressive. "But will this system and management be right for 10 years time?" she asked.

She suggested a move to spring calving might cut investment required. "Lower reinvestment would be needed with a spring calving herd of 400 cows by reducing output per cow to 5000 litres and grazing the 170ha of accessible pasture.

"Running 400 cows would leave surplus grass growth in peak season which could be made into silage. But the current herd of 300 cows is under-using grass when growth peaks, and you cant get such good grass use through a harvester. Therefore, to meet quota you require more lactation days, meaning more supplementary feeding indoors when grass could be grazed outside."

Producers with high-cost systems should consider whether they can maintain reinvesting large amounts of cash. "Look at your cash surplus. That means taking the profit figure from your accountant and seeing how much money is left after personal drawings, paying tax and reinvesting in your business."

Mr Harrison said spring calving was an option, but felt there was more to it than suggested, especially during winter when conditions could get worse than they already were. "With 400 spring calvers, where would I winter the dry cows?"

Group members agreed there was less investment required in spring calving herds and those members who had switched found tacking dry cows out to other farms was not a problem. "Producers can easily pick-up cheap winter housing in redundant farm buildings on local farms," said Ms Foster.

According to Ms Foster, one way of avoiding bankruptcy – a potential concern when reinvesting in a high cost system – was to avoid sinking surpluses into depreciable items like concrete and machinery.

"In 10 years time any business must have grown. That does not necessarily mean more cows, but does mean growth in terms of assets."

Ms Foster questioned whether it was wise for tenant farmers and younger producers trying to build a business to sink surplus capital into depreciable items such as machinery and concrete.

She also urged producers to look at other investment opportunities for cash surpluses. "Where £50,000 could be invested in equities over 20 years and with a 15% return it would amount to £818,000. It is important that producers consider other investment alternatives." &#42


&#8226 Is high reinvestment sustainable?

&#8226 Look to maximise grazed grass.

&#8226 Avoid sinking cash into depreciating items.