Keeping a close check on cash flow

With current milk price volatility and high input costs, the most important task that a dairy farmer can do is to look carefully at the cash needed on a month-to-month basis to keep the business operating. A simple cash flow should help many dairy businesses this winter and farmers should try to make savings where possible.

A cash flow is a monthly estimate of costs projected over the next six months. The main costs through the winter months will be feeding costs, breeding, veterinary, fuel and energy bills. Paying the contractor for the summer silage work will also need factored in, as will any loans and hire purchase commitments. Acting now to find cash for the bills will reduce the real worry of not being able to meet commitments.

Feed efficiency-can savings be made?

Due to the very wet summer and early autumn, farmers may have reduced quantity of silage and what silage there is, may be of reduced quality. To address the quantity issue and to reduce feeding costs, ask yourself are there any livestock that could be sold? This is not a winter to keep surplus stock. Try to sell cull cows, cows with health issues or any beef stores, while prices are strong in the markets. The extra cash will be useful, and it will reduce the burden on silage stocks. 

As for the quality, get the silage analysed and check what you must do to balance the total ration. Talk to your nutritionist and discuss if you could reduce protein levels for some of the herd which will save on feed costs. Ensure that the transition and freshly calved cows get top quality rations, you do not want a herd of stale cows when milk prices do improve. The use of straights may be an option to reduce feed costs. Try to be realistic in your aim for the herd milk output as the milk price to concentrate ratio this winter reduces the profitability of producing extra litres.

Aim to avoid any overfeeding, consider grouping cows according to stage of lactation and feed to yield. Keep a check on feed efficiency monthly, for example use CAFRE monitoring tool Margin over Concentrate (MOC) available under DAERA online services.

Avoid waste in all areas of the feeding system, by regular calibration of feeders, care when filling the diet feeder, and keeping the feeding areas clean.

Slow down investment

It is worth considering deferring the purchase of machinery and capital works until milk price improves. There is no point in adding to the financial burden in the short term. Time enough to stride ahead when milk production is once again a more profitable business. This does not include essential and regular maintenance that is required to keep the machinery you have working longer and more effectively.

Take the help available

Discussion of any potential problem in advance is always better than the stress of imminent pressure to pay bills. Talk to your bank manager and using a simple cashflow, arrange suitable borrowings if necessary to best meet the needs of the farm business. This may involve restructuring existing loan repayments. Phasing payments for feed may be arranged with the feed representative. With tax demands due, talk to your accountant to check if staged payments or profit averaging are an option.

Summary

A cash flow can be simple and effective. Plan to make a number of small changes in feed efficiency which will all add up to save costs over the winter. Assess silage quantity and quality and plan accordingly. Try to be careful with expenditure and take help and advice where available. Resources, including a cashflow table and articles/videos that can help, can be found on the CAFRE website and Rural Support are available to offer business support on their helpline 0800 138 1678

CAFRE are running two meeting to outline the options available to dairy farmers experiencing reduced margins leading in many cases to a negative cashflow. The meetings are in Greenmount Campus, Antrim on Monday 6^th November at 8pm and in Loughry Campus, Cookstown on Tuesday 6^th November at 8pm.

The meetings will feature CAFRE business technologists and advisers summarizing the actions that farmers can take in the short to medium term to plan for coping with low or negative cashflow. Representatives of the banks will present their view on the present situation and outline the range of options that can be considered to help businesses deal with debt negative cashflow. Rural Support will also be present to explain their services to farmers and explain how to contact them.

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