Opinion: Control the controllable in uncertain times
© Tim Scrivener “Milk price Armageddon is on the way,” screamed the headline on a recent dairy market bulletin.
My stomach sank. I had already been hearing plenty of market signals that the milk price was likely to fall this spring.
Although I understand that volatility is a fact of farming, it doesn’t mean I don’t feel anxious about the prospect.
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I can only imagine how others must feel reading predictions of the industry shrinking at speed when their business is already hanging by a thread.
What’s needed is balance.
Commentators base their predictions on the available evidence from the markets, but there are multiple factors that influence the farmgate milk price, as I was glad to be reminded by Patty Clayton, the AHDB’s lead dairy analyst, at a recent meeting.
At times, the AHDB has been criticised for a certain reticence when it comes to market analysis – not wanting to risk making bold predictions that turn out to be off the mark.
But no one has a crystal ball, so a measured analysis of the various data that contribute to the market horizon is our safest bet.
Patty explained there is now pressure on milk prices because of a rise in milk production in the northern hemisphere, but higher retail prices and the cost-of-living crisis are starting to have an effect on demand from consumers.
However, we don’t yet know what the weather will do this spring and how big the production peak will be.
There is also potential for improved demand from China later in the year, and stocks of butter, cheese and whole milk powder within the EU are not excessive.
With input costs such as fertiliser, feed and energy still very high, milk processors will surely be wary of dropping the milk price too low and putting autumn milk supply at risk.
Although it would be foolhardy not to budget for milk price cuts this year, and the analysts may be correct in their interpretation of the market signals at this particular time, I’m trying to remain level-headed about the situation.
Our discussion group recently moved our comparable farm profit meeting forward to the beginning of the year.
It is very welcome to have a chance to review last year’s figures while they are still fresh in the mind, and you can actually remember the management decisions that influenced them.
I’ve used the data to create a budget for this year.
In the process, I discovered a couple of small bits of good fortune – my energy contract is fixed for a year longer than I thought it was, and due to an error with the bank I have been overpaying a loan repayment, which could give me some breathing space.
Once you start scrutinising the numbers, you find the places where there is room for manoeuvre.
My advice to anyone who is feeling worried is to not read headlines and snippets of commentary on social media, which never give you a rounded perspective.
Do a budget and control the controllable. Seek help from advisers and talk to other people whose judgement you trust.
This year could be a rollercoaster, but I’m sure I will learn some valuable lessons from the ride.