No place for average in modern dairying farming

How do you protect your own business from volatile commodity prices and exchange rates – and then there’s the weather.

The Andersons model dairy farm, Friesian Farm, which was revealed at Livestock 2012, demonstrates a potential surplus in 2011-12 of 3p/litre, but a margin from production of only 0.7p/litre. In 2012-13 this changes to a surplus of 1p/litre, but a minus margin from production – this is average.

Is it good enough to survive in the industry rather than prosper? There are no secrets to success; it starts with planning for each year, so budget. The best farmers plan ahead. Have a good idea of what expectations in the budget need to be met and be honest with the figures.

Ask, what are the requirements of the business? Failure to pay all people working on the farm a decent return, as well as those that invest in the business, will result in the business either failing or lurching from one crisis to the next with little prosperity in between.

Friesian Farm Review

For many years the Friesian Farm model has worked to reflect the “average” farmer.

However, increased costs of production – most notably in the feed sector – along with other inflationary challenges, and atrocious weather conditions brings the question can the “average” survive?

Being in the top 10% of profitable dairy farmers in the UK has to be the best option for any dairy business that is forward looking. It will then be able to deal with market forces.

So what options does the “average” farmer have? They can either, increased production a cow, but continue to calve all year round or move the existing dairy herd into two calving blocks (autumn and spring). Both of these options would supply a level profile, but what about the cost basis and impact on lifestyle?

Option one:

More milk/keep calving year-round

Positives

• Greater income

• Greater opportunity to employ key skills

• Economy of scale on power and machinery and rental costs

• Volume bonus

• Business will struggle to grow.

Negatives

• More work

Higher feed costs.

Option two:

Two calving blocks / lower production

Positives

• Simpler business

• Lower costs of production

• Greater return a hectare

• Improved animal health (calves and cows)

• Lower replacement rates

• Business is fit to grow.

Negatives

• New skills and mindset required.

Being average is not an option and change for many is essential if they are going to prosper, not just survive. Focus on profit not just production. Farmers that do both are already in the top 10% of the most profitable dairy producers.