By FW staff
MILK producers must move away from high input/low output systems to survive the squeeze.
At least 3p/litre profit is needed to guarantee survival, Ian Browne of the Farm Consultancy Group told a recent Practice into Profit seminar at Gelli Aur College, Carmarthenshire.
But he knew of farmers whose combined variable and fixed costs totalled 17.5p/litre, leaving a profit of only 0.5p/litre to cover drawings and reinvestment.
It has never been more important for producers to identify weaknesses in the businesses, and to take single minded action to correct them, he said.
During more profitable times, too many producers had ignored the negative aspects like excessively high fixed costs which now threatened the viability of many businesses.
Realistic cost reduction targets should be set and progress on achieving them carefully monitored. “I suggest carrying out a SWOT analysis to assess the strengths, weaknesses, opportunities and threats that impinge on your businesses.
“A business needs to play to its strengths and avoid weaknesses. The trading accounts should be scrutinised for the areas that seem out of line and wasteful. This does not mean lashing out wildly cutting staff and costs, rather sit back and think what you are trying to achieve.”
He forecast that milk producers would either choose high input, high yield systems, or adopt forage based systems with yields of 5500 or 6000 litres a cow. A SWOT analysis would reveal which camp best suited individual farmers.