Myth 3 is “The only way to grow is through expansion”
The last in this series of articles is about the hot topic of Dairy Expansion and Herd numbers.
WARNING! I’m going to ask some hard questions about our approach to farming so this is not for the faint hearted!
Firstly I’d like to ask the question: Are we involved in Farming or Agribusiness?
The two in my view are not necessarily the same. We all want to work the land in a safe and correct manner but we also need to recognise that we need to make a profit. I know some great farmers who struggle to make money. They can grow crops on great land and manage animals better than most but they struggle to make a profit. On the other hand I know some farmers who feel they don’t manage their farm as well but still make a healthy profit even though they are on mediocre land.
My challenge to you is to recognise that expansion and all that it entails needs an agribusiness approach, not just a farming approach.
In our experience in Agribusiness over the last 30 years we have seen the ups and downs of the quota system and the knock on effect in our dairy customers.
There is a hugely worrying trend over the last few years for farmers to keep more and more animals in the herd. As we have seen over the last few years this has led to huge pressure on fodder reserves, farmers labour time and stress. Too many of my customers are under so much pressure running around after an extra 30 cows when they are set up for 60 cows for example. I have a customer who despite the best advice from his father has gone from 90 to 160 cows and is under serious pressure for fodder over the last few years. If he had 70 less cows and used half his inputs he would be a very wealthy farmer. As it is he is under serious financial pressure. The myth that you need to expand herd numbers to increase milk yield needs to be put to bed.
Our advice over the last few years has been to get more from your existing animals. Why not push your herd when quotas are abolished instead of spending hundreds of thousands on new sheds, parlours and land. Generally a cow in Munster doing 25 litres a day is considered a good cow. Up in the North of Ireland just 200 miles away that same cow is capable of 50 litres on different feeding regime! Imagine your 100 cow herd milking as much or more than your neighbours 200 cow herd, except that you don’t have his bills for new parlours, sheds and don’t have to rent expensive land for silage! Is that not good business?
We are not saying don’t expand your numbers at all but the sensible business approach is to push your animals first and then see how much more your farming situation can handle.
Lets look at the factors which are influencing your expansion and discuss them briefly
World Milk prices. What happens if world milk prices fall? The first thing to watch is not the price, its your margin. If inputs are cheap then you can still make a good margin at a lower milk price. The second important thing to recognise is that world milk prices go in cycles. They go up and down every few years. We must make our money when the price is high and put some away for when prices are not so good. That’s just good business.
Herd Numbers. Most people are becoming increasingly worried about herd numbers growing year on year. I know of farmers who are planning on doubling their herd size post quota. On paper this may seem like a good idea but I question the economics of making more money in this manner. More numbers means longer hours, more stress, huge pressure on fodder supply, more vet bills, more housing, more fertiliser, more feed, more equipment.
Rented land. With land prices on the increase and land in short supply you would have to question the business sense in renting land at 200 to 300 euros per acre. As we have said above if its fodder you are short of why not go back to basics and look at buying in more fodder or using what you have more effectively. We have long campaigned for the use of straw in all ruminant diets and it can be a great source of long fibre for animals to prevent acidosis. Personally I’d prefer to see a farmer putting up a cheap haybarn for straw or some other fodder rather than renting expensive land. The logic of spending half a million on 50 acres and being under pressure to pay for it for 30 years does not stack up from a business point of view. There are easier ways to make money in business.
Fodder. With added expansion comes added pressure to feed big numbers of animals. As we have seen over the last few years Fodder quality and quantity is becoming a serious concern. Our winters are getting wetter, our summers are getting drier and this is putting huge pressure on grass and fodder levels in the country. We all have short memories when it comes to Fodder shortages. You must allow for disastrous years for fodder such as we have had 2 out of the last 5 years. Consider buying in fodder from other sources and reducing your dependence on it by increasing your concentrate feeding rate. The one positive from the fodder shortage was farmers finally realised the value of feeding heavily. Cows calved well, recovered well, milked very well, kept body condition well and were in good health despite the fodder shortages. Every 1 kilo of concentrate replaces 5 kilos of silage.
Workrate and labour. If you don’t value your time, no one else will. The vast majority of farmers are working long hours for small pay. If we add in an extra 20 or 30 cows into the mix and this becomes far more challenging. Farming has to reflect your lifestyle and no man can keep going forever. You have to value your time and see if the extra hours of work from keeping 30 more cows or renting 30 extra acres is going to pay you. The thing that keeps me going when helping people is improving our customers lives by making their jobs a little easier. Sometimes you need a fresh viewpoint to look at what you are doing to see if there is a slightly better way of doing things. Small changes to shave 5 minutes per milking is an extra 70 minutes a week to do something else productive.
The take home messages that I’d like you to think about are:
Get more from your existing Dairy herd before keeping more animals. A 25 litre cow can become a 50 litre cow on a different feeding regime.
Watch your margin and cashflow. Be aware prices will rise and fall, margin is crucial.
Spend some time regularly planning where you want your business to go and how you can improve small things regularly. 1% improvement every week is a 50% improvement every year!
Make sure your decisions are based on a fair value of your own time. You need to have the business running well and efficiently for those coming after you.