The impact of COVID-19 on the Food Service market has been dramatic. This market has disappeared overnight and although we still have the same number of people consuming dairy products in the country, the processors and supply chain has had major issues adjusting to the change in supply/demand, especially given the panic buying that has occurred.
As a result, we have seen some milk buyers significantly drop the price of milk, some actually increasing the milk price, some delaying payments and as of yesterday some asking farmers to reduce the amount of milk that they are sending.
It is important to remember that these will be temporary issues and eventually the market place will settle back down. But it is causing significant cashflow issues for some clients depending upon which milk buyer you supply.
If this is causing your business significant cashflow issues, then it is important that you talk to us and your bank manager so that we can investigate how to get through the coming months.
If you have been asked to reduce milk production in the short term, then please listen to your milk buyer and co-operate. They are trying to get both you and themselves through this difficult period without more draconian and long term damaging measures. However, please be careful about how you drop production as you do not want it to have a long term effect on longer term production when demand will return.
So, these are the ways you should consider dropping production in your herd in order of priority:
- Turning cows out to grass will often drop milk production, and this has the added bonus of significantly reducing feed cost at the same time. If you are managing your grazing well, spring grass is often worth 20 litres of milk, so ensuring you take out cake below this level will help maximise your margins. However, care should be taken if you have a large number of fresh calvers in the herd giving 30 litres or more which are not in calf, as this will lead you to reducing their milk output for the next 6-8 months. It could also lead to fertility issues in these cows which will mean that their milk production will be compromised next year too. Please give us a call if you want to discuss this further.
- Get rid of your cull cows sooner rather than later. These cows do not have a long term future in your herd and at least by taking them out of your herd you will be saving on costs (feed/bedding/recording/your time). You may have issues getting them booked into abattoirs as many farmers will consider this route (so do it sooner rather than later) and this in turn is likely to depress the price. But first loss can often be the best one. Alternatively, if you have plenty of grazing land, dry these cows off and turn them out onto cheap grazing and phase the period that they leave the farm. But if you go down this route make sure it is good grazing as you don’t want them losing weight and compromising on cull price even further.
Be careful how many cows you cull as you will need enough cows in the herd going forward to spread your fixed costs over. Do not use this as an excuse to have a major clearout and get rid of cows that really don’t justify it, especially if heifer numbers are on the light side for the next 2 years.
- Look at your stale cows and dry off those that are say 4-6 weeks away from their normal dry date. You will not lose any further production on these cows in the coming few months, and as long as you ensure that they do not go onto top quality pasture and go fat, there shouldn’t be any long term damage done in the next lactation. If these cows are giving significant milk (20 litres+) you may need to shut them away on dry cow mix for a couple of days in order to drop production before finally drying them off.
- And if you still need to drop milk further, look at reducing cake levels to cows that are say 200 days in milk and well in calf. This means you will only lose milk for a few months, save on feed costs during this period, and not compromise production in 3-4 months time.
