Tight financial control can
ease worries
include ensuring all monies due are
collected as quickly as possible,
including any VAT refunds due.
be
Louisa Sercom
With income squeezed it
will really pay to keep a
close check on the
finances according to UK
FBA Manager Louisa
Sercombe.
Working with farms across the
country, it is clear that the current
trend in prices is having a big impact.
The farmers who are best placed to
manage their way through have got a
tight control on the financial side of
the business. Rather than waiting for
the year end to get a breakdown on
performance, they make sure they
have detailed information to hand to
guide decision making.
Second there is a better understanding
of how well the individual enterprises
are performing. Timely gross margins
can give an invaluable base for farm
planning. Is it worth expanding an
enterprise? Would more cows pay?
Can savings be made on heifer
rearing? Was growing wholecrop a
good move? Without detailed
financial records it is hard to make a
balanced judgement.
In addition to keeping the books up to
date and providing accurate
management reports they can help
keep a close eye on day to day
management. They can manage VAT
and operate payroll systems and help
with livestock records and other
statutory paperwork. They can help
ensure your office is a source of
management information to help
control the business
promar
the
standard
Winter2014
Perhaps most important is the peace
of mind in knowing that you
can concentrate on the practical
day to day farming, safe in the
knowledge that the finances are
being kept up to date and you
haven’t got to spend time in the
office keeping on top of
everything.
The Promar Farm Business Secretaries
work with a huge diversity of farm
businesses to ensure that they have
the financial data they, their bank,
their accountant and their consultant
will need to ensure the business is in
good shape.
Accurate and up to date financial
information is always important but
never more so when there is
downward pressure of prices.
Reduced cash inflow means things can
soon become tight but at the same
time the demands are increased to
drive efficiency out of the farm and an
increased risk that the financial
management will fall behind.
Strong financial management can
bring some huge benefits.
First and foremost is the need to
manage the overdraft and creditors so
that the true cash position of the
business is understood. This can also
Focus on technical performance can reduce
impact of price fall
All our secretaries have a background
in farming either through education,
living or working on farms or a
combination of both. They understand
the importance and value of timeliness
of information and the demands
outside the office. They appreciate
how decisions outside the office can be
strongly backed up with information
produced inside the office.
Published by: Promar International, Alpha Building, London Road, Stapeley, Nantwich, Cheshire, CW5 7JW.
Tel 01270 616800 • Fax 01270 616704 • www.promar-international.com
Put yourself in your staff’s shoes
Hutches bring many benefits
Regular feeder calibration pays
Planning next year’s forage should start now
Tight financial control can ease worries
A
Company
Riding out
the storm
No one can deny that the last
six months will have a
significant impact on the
dairy industry.
The cut in milk prices has affected
every dairy farmer, and everyone
else working in the dairy farm
sector. Yet production continues to
rise and a recent Promar survey
confirmed that the majority of
dairy farmers will still be looking
at options to expand.
UK production was 8% up to the
end of August and the EU is
predicting 3.7% higher output in
2014 compared to 2013. And this
is before the removal of quotas
that could signal further increases.
This extra production is being
produced against a background of
a market facing reduced demand
which will make increasing prices
something of a challenge.
However, the GDT auction prices
rose recently by 1.4% which might
suggest that prices may at least
have bottomed out.
Against this background farmers
still have to plan and run their
businesses. I think it is important
to remember that dairy farming is
a long term business and has
always had to ride out fluctuations
in fortunes – and in most cases
done so successfully. The annual
production cycle is a year. It takes
around three years from an
insemination until a heifer enters
the herd. Forage planning today
will affect production right
through to the end of next winter.
To weather a price decline such as
is being experienced, it is vital to
take a long term view of where
the business needs to be and the
size, structure and level of
technical performance required to
2
achieve the necessary level of
financial results. Then it is
necessary to identify the
incremental changes that together
can help to deliver improvements
in all aspects of performance
One bit of good news is that feed
prices are generally declining, and
while these will not offset the
entire fall in milk prices they can
help to soften the short term blow.
Dairy farming is not a business
that can be managed based on
short term decision making.
It needs long term targets that
reflect the nature of the business.
At Promar, we work with
customers reflecting the
considerable breadth and diversity
of dairy farms in the country to
help develop and implement the
plans that can deliver sustainable
dairy businesses. We also work to
help identify the opportunities to
improve technical performance.
In this issue of the Standard we
look at factors affecting all dairy
businesses which are highlighted
in our unique Radar analysis.
If you want a free Radar
assessement of your business,
call us on 01270 616800.
James Dunn
Managing Director
James Dunn
Focus on technical performance
can reduce impact of price fall
Andrew Watson
Lancashire base consultant
Andrew Watson considers
what steps can be taken to
help offset the consequences
of the current low milk
prices.
No-one should be surprised by milk
price volatility. It has been a fact of life
now for many years and it is
something we have been helping
clients insulate their businesses from.
Figure 1 shows the milk price over the
last seven years along with three
different lines representing commonly
reported levels of cost of production.
At 26ppl farmers will have made a
positive return 80% of the time.
At 30ppl it is as very different picture.
It is vital farmers know exactly where
they stand and this is the starting point
for plotting a route forward. What is
the breakeven point for your business?
Figure 1 - Average GB Farmgate price
The key lesson is that there is no single
solution. Each farm is different with its
unique set of circumstances and it is
vital to develop a plan which
acknowledges those circumstances
and the aspirations of those running
the farm.
The reality is that in the vast majority
of cases, doing nothing is not an
option. Changes have to be made both
short and long term to develop more
sustainable businesses. This will involve
considering what is the best shape for
the business going forward. What is a
realistic and appropriate herd size for
the farm? Will the current facilities
cope or is some investment needed?
What are the realistic options for
investment and development of the
unit and how will these be affected by
issues such as succession.
Figure 2 - Milk price:feed price ratio
While long term plans are being
developed it will be vital to review
technical performance to identify any
opportunities to drive margins in both
the immediate short term and longer
term. Our experience is that in the vast
majority of cases it is possible to
identify scope to reduce costs and/or
raise output.
Is anything holding back yield?
A whole host of factors can prevent
cows milking to potential and so
reduce margins. The good news is that
many of them can be quickly and
cheaply rectified.
Looking at the average and top 20%
of farms on Milkminder there is a big
difference. The challenge on every
farm is to move performance into the
top 20%.
Consider your contract
You can’t affect base price but look to
maximise bonuses for hygiene, milk
quality and for the production profile.
Many contracts are paying more for
butterfat so it may make sense to try
to increase the butterfat percent but
do the sums first. Will modifying the
diet to chase higher fat actually pay or
will it just increase costs for little or no
return?
Monitor feed costs
Feed costs are over 40% of production
costs so a good place to start if you
want to try and cut overall costs.
Prices are easing back and they should
allow a 1.5ppl saving compared to last
year. While this won’t offset the total
milk price drop it will be a good start.
Figure 2 shows the milk price: feed
price ratio for the last six years and
predicted for the next year. The ratio is
predicted to remain strong despite
lower milk price so this is an
opportunity, but don’t chase/buy milk.
It will be vital to monitor margins and
feed cost per litre closely.
Cow comfort is crucial. Cows need
clean comfortable beds and the longer
they spend lying down the better.
Blood flow to the udder increases by
30% when a cow lies down and it is
estimated that 25% of milk yield is
directly related to how comfortable
cows are. Make sure you have enough
cubicles. The absolute minimum is one
cubicle per cow but it has been shown
that having 5% more cubicles than
cows can improve production.
Take a look at cow flow. Research
suggests that cows should spend no
more than three hours a day going to
and from milkings. For cows milked
twice a day this means 90 minutes
maximum away from the bedding and
feeding areas at each milking while for
herds milked three times daily the
maximum is one hour per milking.
It is estimated that for every hour per
day above the three hour target yields
will be depressed by a litre per cow per
day. In addition there is a reduction in
the expression of heat behaviour and an
increase in the incidence of lameness.
Review mastitis protocols
Have you got protocols in place for
preventing mastitis and treating any
cases that occur? Good protocols will
ensure consistent management and help
reduce the impact and costs. Fewer
mastitic cows also make for easier,
faster milkings and better staff morale.
Sufficient feed access is crucial as cows
need to eat for about 5 hours a day,
typically made up of 8-12 feeds.
Anything that prevents this happening
will reduce intakes and yields. Look to
provide a minimum of 46cm of trough
space per cow on a total adlib feeding
system.
The key is to focus energies on what
you can affect. Small incremental
changes can soon add up. Setting
targets and improvement objectives for
as many areas of management as
possible and following them through
will help insulate against current low
prices and put the business in better
place when prices rise again.
3
Put yourself in your
staff’s shoes
Doing the job day in, day out they
will notice problems and
opportunities to improve, so allow
them to contribute their ideas which
might have a big impact on yields,
margins or cost saving.
Make time to talk and listen to staff.
This can be an informal discussion
during a coffee break but will be
time well spent.
David Rhodes
Midlands based consultant
David Rhodes believes that
focussing on motivating staff
could be an essential step in
developing a sustainable
farming system.
How do you think your staff are
feeling at the moment with all the
talk of reduced margins and
downward pressure on profits?
My experience from nearly 25 years
as a herd manager is that they will
probably feel vulnerable and
possibly demotivated, yet they can
be a major asset in driving efficiency
from the business.
Their attitude and enthusiasm will
have a significant impact on how
well tasks are carried out and they
are best placed to spot problems
and suggest ways to improve
performance and reduce waste.
With demotivated staff attention to
detail and enthusiasm will soon wane.
As farm teams get larger and more
specialised, it is vital to invest more
time in managing staff effectively to
drive overall performance.
Communication is key
Do your staff know what your
objectives are and exactly what their
role is? All too often staff do not
understand what the business is
trying to achieve and how they
contribute to this. So take the time
to make sure they can buy into what
you are trying to achieve and can
take ownership of particular aspects.
Communication is a two way
process. Encourage staff to come
forward with ideas for how
performance can be improved.
4
Set targets
Targets are a great motivator
because people like to try and
achieve or exceed them and they
will respond to the challenge. Make
sure the targets are meaningful to
the business and are achievable.
Ensure they are commonly understood
and that performance against target
is regularly updated. A simple
wipeboard is a cheap and effective
way to do this. If targets are not
being achieved talk about what
might be done to rectify the situation.
My experience is the reverse. People
appreciate the investment in
training and they remain committed
to the business that is investing in
them.
many benefits
We went for a combination of 10 single
hutches and two multi-hutches that can
each hold 5-7 calves.
Some training will have a direct
impact on costs and performance.
For example, a foot trimming course
can help reduce the costs associated
with treating severe lameness while
making cows more mobile which is
known to improve intakes and
production.
Let them focus
All too often I find that core people
get taken away from their primary
role to do other less skilled tasks.
For example, the herdsman who gets
put on a tractor, grain or straw carting.
If someone is a herdsman employed
to manage the cows let them focus
on doing that job to the best of
their ability, free from distractions.
The benefits can be considerable.
Getting your team motivated and
committed could have a big impact
on how your herd performs so it is
well worth investing the time in
managing them.
Invest in training
As herds get bigger it becomes
important to delegate more.
The better trained your staff
are, the more motivated they
will be and the more you can
delegate. Find out if there are
specific skills they want to
learn and then arrange
training.
I have been told that ‘If I
train someone it makes
them more attractive to
other farms and they
will leave’!
Hutches bring
James Berry
and Tony Farthing
Jonathan and Katie Guest
Modest investment in calf
rearing facilities is helping
one Wiltshire farming family
move their business forward.
Farming at Manor Farm, Avebury
brings some particular challenges
for Tony and Judy Farthing, who run
the tenanted farm with their
daughter Katie and son-in-law
Jonathan Guest. The farm is in a
world heritage site and includes the
prehistoric Avebury stone circles.
This makes developing the farm
particularly difficult.
The farm is home to the 160 head
all year round Avebury herd of
pedigree Holsteins which averages
8,300 litres on a system based on
grazing in the summer and a TMR
diet in the winter.
“Following discussions with James we
decided to look at changing calf rearing
as this would release potential space for
more cows.”
Calves were being reared in an old
cubicle building. Being right next
door to the cows with shared air
space meant this was not an ideal
location and respiratory problems
were an issue. It was also a labour
intensive system. James Berry suggested
moving the calves into hutches and
refurbishing the cubicle building.
This would allow the herd expansion,
simplify cow grouping and improve
calf management, while avoiding
potential planning issues.
Katie, who had taken on responsibility
for calf rearing, investigated the
options, looking for a flexible
system which was easy to manage
and use, eventually settling on a
system from Holm and Laue.
“We wanted to be able to split the
milking herd but the layout of the
cubicles made this difficult,” explains
Tony Farthing.
All calves are fed colostrum before
moving into individual hutches.
They are fed on cow’s milk, straw
and calf rearer and have access to
fresh water from day one. They will
typically move into the multihutches at around four weeks old
provided they are eating solid food
and drinking water. They are moved
from the hutches at weaning.
“We have already seen big benefits,”
Katie continues. “Calves are stronger
and healthier and we are seeing fewer
respiratory problems. Mortality has
dropped by two percentage points. The
first calves we moved out of the hutches
were as big as the last batch from the
old system that were two months older!
As we are looking to calve at two years
old, this better early growth is really
important and will help us expand the herd.
“The hutch system cost around £12,000
and will be used to rear around 130
calves in 6.5 batches per year. They are
guaranteed for 10 years so this will
work out at around £10 per calf.
The focus has been on improving
performance from the existing herd
and the family are supported by
herdsman Richard Peer and foreman
Peter Steven. The herd is bred by
Genus ABS RMS and the calving
interval has been tightened by 30
days in a year.
Working with Promar consultant
James Berry, the aim had been to
look to expand the closed herd to
180 cows while allowing more
options for cow grouping, but
putting up a new building was likely
to prove difficult.
“The hutches are all really easy to clean
and have a gate so there is no need to
climb in and out which makes
management easier. They can be bedded
from the back through a hatch which
also improves ventilation. The multihutches have individual buckets which
make it easy to check all calves are
drinking and they can be moved out of
the way for easy cleaning.”
“With the new calf system working well
we can now focus on sorting the
cubicles, increasing cow numbers and
further improving milk output.”
“Being on an exposed site we needed to
provide adequate protection,” Katie
explains. “The system includes a
moveable veranda which offers more
protection from the elements
and makes for a more
pleasant working
environment.
5
Planning next year’s
forage should
Regular feeder
calibration pays
start now
Ensuring accurate allocation of feed is vital to keep close control on the
major cost of milk production, but as Andy Taylor, consultant in Cheshire,
explains many parlour feeders may not be feeding what is expected.
When is the last time you checked
that your parlour or out of parlour
feeders were feeding what you
expected or what the computer is
programmed to feed? As with any
mechanical device, accuracy can
change with time. Furthermore, the
density of different feeds can vary,
affecting feeder accuracy.
If feeders are dispensing too little, cows
will be underfed, milk poorly and
potentially suffer from lower fertility.
If they feed too much, your costs will
increase with no guarantee of an
economic yield response and an increased
risk of problems such as acidosis.
All too often it is taken for granted
that the feeders are accurate and left
unchecked, but in the current economic
climate it will pay to make sure your
cows are getting the feed expected.
A client of mine in Cheshire installed
new parlour feeders earlier this year.
When we carried out a regular spot
check a couple of months later we
found that more feed was being used
than expected, around eight tonnes
per month.
When we investigated further we
found that on average the feeders
were dropping 30% more than
expected – a huge difference made
worse by a change in the parlour
concentrate since the feeders were
originally installed. In one month, the
cost of feeding inaccuracy was over
£1800 which would have had a huge
impact on margins if left uncorrected.
Check accuracy regularly
It will really pay to keep a close eye on
the accuracy of feed allocation.
Correct allocation will reduce costs
and improve cow health and
performance.
The accuracy of dispensing of parlour
and out of parlour feeders should
ideally be checked every month as it is
not unusual to see inaccuracies of as
much as 10% developing in just a few
weeks. Feeder accuracy should also
be checked every time the formulation
of the compound is changed as this
will affect the density of the product.
It will only take around an hour to
check, adjust and recalibrate feeders
but the benefits can be considerable.
Milk from forage continues to underpin higher margins per cow,
and as Yorkshire consultant Alistair Hugill explains, it pays to start
planning next year’s forage production sooner rather than later.
Andy Taylo
r
And don’t forget to check
the weigh cells on the diet feeder as
inaccuracies here can have a similar
impact. With tonnes of silage being
dropped into feeders followed by
large quantities of other feeders, it is
not unusual for the weigh cells to
become inaccurate over time which
can become significant, especially
where smaller quantities of more
expensive ingredients are concerned.
Again, making the time to check the
weigh cells monthly will be a sound
investment.
Finally, always check feed usage
against the invoices. Are you buying
what is expected? Do loads last as
long as expected or are you getting
through feed too quickly? Checking
invoices can help highlight possible
problems with feeding accuracy.
Keeping tabs on feeder accuracy will
be one way to help maintain yields
and margins this winter.
Analysis of Promar Milkminder data
shows that producing more from
forage can have a significant impact
on margins. The table compares the
average results with those of the top
20% selected by milk from forage.
The top 20%:
• Produced 800 more litres per cow
from forage
• Achieved 40% of total production
from forage compared to 27%
• Had a 13% lower feed rate per litre
• Had a feed cost/litre 13% less than
average from a similar cost/tonne
• Achieved a higher margin per litre
and similar margin per cow despite
producing 470 litres less per cow
Perhaps most significantly, by producing
more from forage the top 20% are
better insulated from fluctuations in
both milk and feed prices.
To produce 40% of milk from forage,
the average Milkminder farmer would
have to produce two litres more from
forage per cow per day, which equates
to less than 1kgDM extra forage per
cow per day. For the average 182 cow
herd that adds up to around 66
tonnes of additional forage dry matter
over the year. But it could generate an
additional £18,000 in margin.
Farmers who successfully produce
more from forage will have plans for
grazing and conserved forage with
targets, and they will review and
modify the plan as the season unfolds.
For example, in the last year this might
have involved taking paddocks out of
the rotation when grass growth was
vigorous to maintain grazing
quality and increase silage
production.
6
Alistair Hugill
Promar Milkminder Promar Milkminder Difference
top 20% by milk
average
from forage
Cows in herd
193
182
Yield per cow (L)
7608
8074
-466
Milk from forage per cow (L)
3005
2209
+796
% of total production
40%
27%
+13%
from forage (%)
Concentrate use (kg/L)
0.29
0.33
-13%
Purchased feed cost/litre (P)
7.28
8.58
-13%
Margin per litre (p)
25.96
24.75
+5%
Margin per cow (£)
1975
1998
-1%
Start planning now
It is important to start developing a
forage plan as soon as possible,
beginning with a review of current
performance. What is your current milk
from forage and how much forage was
produced? What production from forage
will your current silage stocks support.
Then consider targets for next year for
both milk from forage and forage
production? What grazing areas will be
required and how much silage do you
need to make to achieve the target
production? These will allow you to
develop a management plan to
produce the target production while you
still have time to influence production.
• Now is the ideal time to take soil
samples to ensure that nutrient levels
are as required to maximise potential
growth. Fertiliser purchases can be
made to address any deficiencies
• Grazing infrastructure should be
reviewed. Are paddocks the
appropriate size? Is access suitable
for extended grazing? Invest in a
rising plate meter so you can
measure covers and improve grazing
supply over next summer
• Cropping policy can be assessed to
ensure total silage output will hit
target. What acreage of first and
second cut are required? What
contingencies can be made in the
event of a late season to ensure total
output is achieved? How much
maize is required and which variety
will give the best combination of dry
matter production and energy
content? Is wholecrop an option?
• Talk to your contractor sooner rather
than later so he understands your
objectives and the acreages that will
be cut. The relationship with your
contractor can have a huge impact
on your forage production
Taking the time to make a detailed
forage plan will help underpin
production and margins next year and
ensure milk from forage is maximised.
7