Gary is farming a 500 sow unit, finishing all pigs on site in Cootehill, Co. Cavan. The farm is very efficient, with excellent performance figures in terms of numbers born alive, feed efficiency levels and average daily gains. Similarly, Noel runs an efficient dairy farm near Ballinasloe, Co. Galway, and he will be milking 180 cows this year on a milking platform of 45 hectares, producing high levels of milk solids per hectare.

Manage the Short-term Cash-flow

Both farmers recognise the importance of managing cashflow and have prepared budgets for 2016 to help identify periods of potential cashflow deficits during the year. Gary can accurately predict sales and expenses based on sow inseminations, but his one uncertainty is pig price, which he has to estimate for the year. In Gary’s case, due to the cyclical nature of pig farming and the tight margins experienced in the sector over the past five years, similar to other pig farmers, he has stripped costs back to a minimum.

While the lower milk price will have a big impact on cashflow on Noels farm, his biggest unknown is the weather. Noel says ‘this will ultimately determine grass growth, grass utilisations and the amount of feed I have to purchase’. He is operating a low cost grass based system and similarly, he says he would find it difficult to pull any further costs out from the system. Noel has coped well with previous downturns in 2009 and 2012, which have convinced him to focus on grass production and low cost milk production. His key focus is to get cows out to grass early and maximise days at grass.

“Gary’s experience from previous downturn is ‘not to allow efficiency to be affected by cost cutting’ ”

Beware of False Savings

While no capital expenditure is planned on either farm in 2016, as a consequence of the reduced output price, both farmers are very wary of the temptation to reduce costs in the short term which could affect output and farm performance in the long term.

Gary’s experience from previous downturn is ‘not to allow efficiency to be affected by cost cutting’. He advises that he could reduce his costs overnight by changing to a cheaper supplier for his artificial inseminations. However, the effects of this could be seen in six months when output from the farm may be reduced.

Noel advises that his priority is to get through 2016 without compromising cow health, maintaining soil fertility, while simultaneously minimising meal feeding and maximising grass grown. He is confident that his system and his budget will deliver this in 2016. Similar to Gary, Noel recognises that ‘short term gains such as deferring reseeding will impact on profitability in the long term’. This year, Noel will continue to reseed a proportion of the farm and will stick to his fertiliser plan to maximise grass growth.

Culture of Continual Improvement

Gary also advises that he will focus on efficiency and trying to do things better while also trying to further minimise spending around the unit. One area where Gary sees capacity for further cost saving is through improved stockmanship by both himself and his staff. This could allow him to further reduce his medicine and vet bills. Gary recognises the importance of keeping staff involved in the business and the importance of everyone working towards a common goal. For this reason Gary meets his staff regularly to share pig performance data with them.

With feed accounting for almost 70% of the production costs on pig farms, Gary is continually looking at his options of how he can reduce his feed bill. He is investigating the option of home milling his fattener feed, which could offer savings of up to €10/tonne. Gary advises that he will defer any investment until the market is more favourable.

“Noel recognises that ‘short term gains such as deferring reseeding will impact on profitability in the long term’.”

Noel’s long term plan is to grow and utilise more grass by improving soil fertility and maximising his farm stocking rate. He believes that the Teagasc Profit Monitor and grass measurement are very important tools that give him excellent insights into his business on an ongoing basis. He advises all farmers to compare their performance with their discussion group members as they are a valuable source of knowledge transfer and information sharing.

Maintain Good Relationships

In a more difficult year, both Noel and Gary emphasised the importance of having a good relationship with all stakeholders involved in the business such as feed suppliers, sales reps, bank manager, Teagasc/Agricultural advisor and accountant. It takes time for a farmer to build a relationship of trust with stakeholders and it is something that needs to be worked upon constantly. The importance of good technical advice, quality products and reliable service should not be underestimated and are key components of operating any successful business.

Noel’s final words of advice were:

“Mind yourself and stay healthy.”

The latest edition of Agri Matters contains features on the beef sector, the COP 21 climate change discussions and its potential impact at farm level, as well as AIBs usual review and outlook of the farming market. To find out more about these topics please click here