Donald Anderson, who farms in Taranaki in New Zealand, explained to the 400 people in attendance how his low-cost system simplifies decision-making. Donald owns four farms and uses contract milkers or share-milkers to run them. This de-risks his business as labour costs are linked to milk prices and farm profits.

Donald said he needs to be extremely disciplined with expenditure in the high milk price years, so as not to drift into higher cost systems. He said the key in achieving this is to formulate a budget and stick to it.

In good years he spends extra money on repairs and maintenance, so these expenses can be spared when milk prices are low and cash is tight. He says the core system shouldn’t change due to either low or high prices and short-term changes to the system to chase extra production should never be entertained as this can be unsustainable.

He encouraged those at the conference who are experiencing cashflow difficulties not to panic, to complete a budget and to own the figures. He suggested farmers should discuss issues with the bank early.

Donald said he has a contingency plan in place for his own business to defer capital repayments and utilise an overdraft in the case of further milk price drops.

Quality bonuses

Speaking on the same topic, Tipperary-based consultant Matt Ryan said farmers can manage to increase their milk price by focusing on achieving all quality bonuses and improving fat and protein percentages in their milk.

He gave an example of one of his clients who sold the bottom 10% of his herd on milk solids last year and instead purchased cows with higher milk solids. He said there was a €200 difference per head between the sale price and purchase price but this was made up by the increase in value of milk sold by July last year.

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