11 tips to boost dairy business profitability

Dairy farm businesses are under extreme pressure and producers will be looking to boost their bottom line where possible.

Charlie Taverner asked top consultants for their best advice.

The tips range from dealing with new style milk contracts to boosting grazing efficiency.

Tony Evans, Andersons partner and head of dairy business consultancy

1. Bottom-up budgeting The first thing to think about is what you want and need to earn. Ask yourself what your business requirements are for things like tax, repayment and immediate needs. Then, you can look at your business’ performance over the last five years and work out what you need to make up to hit those aims. We call this bottom-up budgeting.

2. Set targets and hit them You need to be looking at key performance indicators and measuring yourself against them. A dairy business should be aiming for £1,000/ha profit – before rent and finance. That profit should be a minimum of 5p/litre, but averaging 10p/litre. It is essential to know what you are comparing to so you can work towards it.

Dairy date: Don’t forget this year’s Livestock Event on 8 and 9 July at the NEC, Birmingham

3. Don’t waste litres Lots of producers are now on A & B contracts, so they are paid a discretionary price for a proportion of last year’s production and a fluctuating rate for any extra. However attractive it might seem when cashflows are severely squeezed, there is little point pushing for those extra litres if the B price is very low. All you would be doing is diluting your returns.

Charles Holt, The Farm Consultancy Group

4. Beware of false savings It is tempting in tough times to cut back on expensive inputs, like fertiliser or other soil treatments. But grazed grass is the cheapest food for dairy cows and when ensiled it is the lowest cost feed over the winter. So there’s no sense cutting back on that crucial element. A better way of saving money would be testing soils tri-yearly and applying the right quantities of slurry, FYM and fertiliser.

5. Shop around Make sure you get three quotes for everything that is bought for the farm. And don’t forget electricity, labour and money. Getting quotes from power companies is easy, or you can use a broker. Quotes for labour can be appropriate if you use self-employed labour or a contractor. Quotes for money means, simply, talking to other banks than your own.

Nick Holt-Martyn, principal consultant, The Dairy Group

6. Consider block calving Could you switch to block calving in autumn or spring for intensive grazing? Now is the time to do it, with the window to stop breeding fast-approaching. Catch up the stragglers now with beef semen only, take a break for three or four months. Come back with a bang, with sexed semen on heifers, conventional on cows. Use dairy semen for three to four months, then beef.

7. Milk your milk contract Try and increase your milk price however you can. This is important when most average milk prices are on the floor. Take advantage of all the bonuses available. That could be for butterfat, protein, hygiene or pattern of supply. Seasonal pricing starts soon, so get ready to take advantage.

8. Make good on your grazing If your grass is looking less than perfect, fix it now while there is still half the grazing season left. Mow off the mess to either bale or graze. Fertilise and then get it back in the rotation within 30 days. Also reconsider those late cuts. They are always more expensive to clamp, so graze it or make dry bales to cut costs.

James Dunn, managing director, Promar International

9. Time to take action We have to recognise just how critical things are in the dairy industry at the moment. Farmers should not stick their head in the sand. Yes, people could have have been proactive about changes to their businesses to cope with the downturn we have seen over the last six months. But they now need to be reactive and take action, as prices might not recover in the next six months either.

10. Manage the short term Cashflow is the immediate demand. You should also do some sensitivity checking around your forecasts for the coming months. That means checking for risks and having some alternative plans. Make sure you have a plan B in every scenario.

11. Always be better Times are definitely difficult, but you can still take on a culture of continual improvement. The way to do this is set some goals for changes you want to make to your business. Pick five things, stick them up on the wall and then measure and monitor yourself against them.