There is no single thing that will solve negative cash flows on dairy farms and instead it is about addressing a range of issues, a senior CAFRE dairy adviser has said.
Addressing a meeting in Cookstown on Tuesday, Alan Hopps highlighted a range of actions that farmers should take this winter.
With most farms having good numbers of youngstock coming through, he said attention should turn to unprofitable cows, especially those over 200 days in milk and not in calf. Where a cow is eating 40kg of silage and 4kg of concentrate, while producing just 10l of milk, the output is just about covering costs. “When she is down into small litres you have to ask why she is still on the farm,” said Hopps.
Many farmers now operate with a high (over 25l) and low group (under 25l), so it is important to set up the diet feeder to the lowest yielding cow in each group and ensure all feeders are properly calibrated. Farmers should be “ruthless” and too often cows are left lingering in the high group when their yields are below the 25l threshold, said Hopps.
He maintained it is a winter to make low yielders “work harder”, while for transition cows, it might be advisable to go more rapidly to a feed-to-yield system. However, he pointed out that fresh calvers and transition cows still need to be well fed.
“You will get the benefit over the entire lactation. If you don’t feed these cows you risk ending up with a herd of stale cows and when prices turn, you can’t take advantage of it,” Hopps advised.
He said variable silage quality is an issue on most farms, with a lot of low dry matter (DM) forage ensiled. Given cows need to eat more fresh silage to maintain DM intakes, farmers are rapidly moving through pits. His advice is to establish what is there, but to use the correct calculation applicable to the DM of the silage.
Hopps also urged farmers to make use of the margin over concentrate calculator available at DAERA online services. He said it was “a simple tool” closely linked to profit that will also give you an estimate of the milk produced from forage on the farm.
“If you are not making more than £4 per cow in margin over concentrate, then you are probably making a loss at the minute and action needs taken,” said Hopps.
On wider issues around finance, he said many farmers face significant tax bills in January on the back of profits made when milk prices were high. “Talk to your accountant now about your bill – it can be reduced or spread out,” he said.
Banks will take a long-term view
Giving a banking perspective at the CAFRE meeting, Nigel Young from HSBC said local banks will continue to take a “long term and considered view” when it comes to current cash flow issues.
He maintained there are a range of options available, including increased overdraft facilities, interest only payments and putting some debt onto long-term loans.
His advice longer term to all farmers is, when profits are being made, to aim to set aside at least one month of output each year in cash deposits.
“It is a good rule of thumb across any sector,” said Young, who added that a business with cash to hand is always best placed to negotiate with input suppliers.
Complete a 12-month cashflow budget
During this presentation, Martin Reel from CAFRE urged dairy farmers to complete a 12-month projection for cash flow.
“It builds up a picture going forward and is a very useful tool. It will give you an idea of peaks and troughs in cash available to your business,” said Reel.
A template spreadsheet is available on the CAFRE website.
Where there are troughs in monthly cash flow, it might be prudent to see if payments for inputs could be adjusted or any planned expenditure delayed.
In the past, farmers might have responded to cash issues by trying to push litres by feeding more concentrate, but the margins are very questionable this year.
Last winter, at milk prices of 47p/l and concentrate at £400/t, each extra kg of feed is likely to have generated a return of 16.4p/l. At a milk price of 30p/l and concentrate at £350/t, the net return is only 1p/l, and that is before other costs such as cooling milk, labour etc. are allowed for, said Reel.
In 2023, CAFRE analysis suggests concentrate costs on dairy farms are averaging almost £900 per cow, so it is already “a huge bill every month,” he added.