With current low milk price, the most important task that a dairy farmer should do is to look very carefully at the cash needed on a month to month basis to keep the business operating through this difficult period. It is important to keep in mind that this financially difficult period will pass as there have been very difficult periods for dairy farmers in the past. The key is to “ride the storm” and seasoned farmers are well aware of the need to steer a steady path. First of all, prepare a monthly estimate of costs projected over the next six months which will go some way to get a handle on the financial situation on the farm. The main costs through the summer months will be fertiliser, contractor and concentrate bills. Taking action now to find cash for those bills will reduce the real worry of not being able to meet commitments.

Reducing feed costs must be a priority in the short term. Concentrate cost is the highest daily variable cost for milk production whereas grass is the cheapest. It makes sense to keep cows out grazing as long as possible and do not be tempted to reduce fertiliser input to lower fertiliser bills. Offering cows a twice daily supply of high quality grass is a must in reducing feed costs. Keep a check on feed efficiency and check yields from forage on a weekly basis. The local CAFRE dairy development adviser can assist with the calculation of milk from forage and advise how to improve milk output and quality as cheaply as possible.

Talk to the bank manager and using a forward cashflow, arrange a suitable overdraft to best meet the needs of the farm business. This may involve restructuring existing loan repayments. Phasing payments for feed and fertiliser may be arranged with the merchant. Discussion and arrangement of any potential problem with payment is always better than the stress of imminent pressure to pay bills.

Additional cash can be generated from sale of cull cows. Select problem cows with mastitis issues and/or those with persistently high Somatic Cell Count. Although it is important not to sell productive cows as they are essential to keep a consistent milk volume and maintain milk sales.

Look carefully at the young stock and if the farm is overstocked in terms of grazing and nitrates issues, consider sale of any beef stock or surplus dairy heifers. Be careful to maximise their income potential by ensuring stock are sold at their best weight and age.

It is worth considering deferring the purchase of machinery and capital works until milk price improves. There is absolutely no sense 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.

Although a sensitive issues on farms, it is imperative that the farmer ensures his family knows about the difficult position and they are supportive in being careful with the family expenditure. Talk the situation over with family, bank manager and advisers. It can be useful to remember that everyone is in the same boat and low milk price affects the local community and the wider industry.

In the coming months keep a close check on the cashflow and take action where needed. In the meantime feel free to contact the local CAFRE dairy development adviser to discuss cashflow concerns.