The current climate for dairy farming is far from perfect. The current levels of inflation we are facing across the UK is heavily impacting the costs of running a dairy farm.
During 2021, our dairy farm consultants at Douglas Green Consulting have seen a dramatic increase in oil and gas prices, making everything from heating properties to using equipment more expensive and, while COVID and other factors have played their part in creating these higher costs, it doesn’t look like things will improve in the near future.
Farming costs rising and it’s not just the UK
Issues with high costs aren’t just in the UK. In Australia, the issue has been worsened for dairy farmers who are facing one of the worst droughts in history. The drought has caused milk production to decrease by 12%, and this is a huge problem for the Australian dairy industry, as it costs these farmers more to produce less milk.
What can Farmers do to improve the situation?
There are a number of small measures that can be taken to lessen the impact and the squeeze on margins. These measures won’t solve the issue fully or make it go away, but they will help to increase margins for your dairy business.
Getting a firm understanding of costs and reviewing what is being spent in your dairy farm is important. Once you understand your outgoings, consider cutting back on costs where possible.
Reduce or stop any activities that don’t add value to the process. Cancel or stop buying anything that you don’t need right now or that can be considered a ‘nice to have’ rather than a necessity.
If you are looking at buying any new equipment then consider delaying its purchase. At Douglas Green Consulting, we are in favour of investing in modern technology and equipment for long-term growth but sometimes short-term cuts are needed while the situation improves.
There are various small actions you can take to improve the yield per cow. Improving the amount of milk you can get from each cow on a daily basis means more revenue and greater net margins.
Whether it’s improving lighting, modifying feed patterns and ingredients or cleaning out water troughs, these changes don’t make a big difference to costs, but they can improve milk yields.
Any extra costs need to be outweighed against the extra yield so make sure to decide carefully on what you decide to implement. If you incur costs that are greater than the extra revenue you will gain then it’s not worth implementing the change.
Review your contracts
Whether it’s your milk contract or any existing lease agreements for equipment, review what agreements you have in place and decide if they can be improved from a financial perspective.
It might be that a contract can be re-negotiated to get higher revenue, or lower costs - or it could be that you can cancel existing contracts and improve cash flow.
Secure financing and any potential grants for farms
There are various government incentives and finance options out there that might help make a difference to your finances. Make sure you are up to speed with your options!
At Douglas Green Consulting, our independent dairy consultants will work with dairy farmers to help them to achieve long-term success. To find out more, or to get help with any of the above, give us a call today for a free initial chat.