Dont put head in sand, face
Dont put head in sand, face
up to change
MOST committed, focused, well-informed dairy farmers will weather the present crisis.
Some will opt for producing commodity milk – others are equipped to target specialist markets. There are opportunities for a few to generate income through diversification but, inevitably, a significant number will decide to quit.
Midlands-based Promar International consultant Simon Thelwell advises that ending milk production, or leaving farming altogether, must be properly managed. Taxation issues can be a problem, and the disposal of assets should be optimised to provide sufficient funds for the farmer and his family to live.
The type of business that has good long-term profit potential is one that is adaptable, has clear future goals, works to a plan and uses outside management help.
The businesses of producers who cope with change by working harder are flexible, adaptable and creative, are not afraid of failure and have maximum growth potential. But these farmers are vulnerable if they keep their heads down until they hit a financial brick wall.
There is also a future, but limited long-term growth potential, for experienced and highly skilled traditionalists who change enough to stay in the black.
In the current, very difficult climate for milk production, Mr Thelwell advises producers to stop worrying about things they cannot change, like the strong £, and concentrate on business efficiency.
Recently published results from 100 monitored units show that the top 25% of producers had lower variable costs in the year ending in March. This gave them a 3.2p/litre gross margin advantage over the bottom 25%, which was worth £30,000 on a 1m litre quota.
Their spending on every element of fixed costs/litre was also lower and, even though they carried only 40 more cows on average than the bottom group, average turnover was 82% higher at £242,500.
"Look at what the top guys are doing," says Mr Thelwell. "Ask yourselves what type of business do you plan to have in the future." *
COPINGWITHCHANGE
• Hard work needed.
• Be flexible, adaptable and creative.
• Dont fear failure.
• Be financially aware.