With volatility the name of the game, and the memory still vivid in the mind, it is worth looking back at what was a success for you, and how you can be prepared for the next roller coaster which is inevitably ahead.
There is no magic formula to deal with volatile prices, however, successful dairy producers incorporate many of the items listed, in the good and bad times, maximising returns when opportunities arise, and managing risk when needed. Controlling what is in their power to affect.
- Planning – prepare a monthly cash flow budget and compare actuals to budget. The budget should be dynamic; meaning when factors change the budget should be updated to reflect the change. Know your cash flow break-even.
- Based on the budget, set milk price targets. The availability of this opportunity of risk management to some suppliers in the UK is rapidly developing, do you know everything you need to know to take advantage of this?
- Use budgeted feed costs to drive marketing decisions. Are feeds priced at levels that meet budget and if so is there a plan in place to lock in prices?
- Maintain good levels of working capital – ideally minimum of £300/cow. Does your financial structure allow you to take advantage of buying opportunities? Is there adequate cash or do you have the availability of a flexi-loan product?
- Strive to harvest and maintain excellent quality forages, which will reduce the dependence on purchased energy and protein. Do you know your feed losses? Is the ration on paper what is actually being fed to the cows?
- Produce milk which maximizes YOUR contract.
- Maximize non milk income by culling cows in good condition and rearing only enough calves for replacement.
- Proactively manage the health of cows. Keep treatments and vaccinations up to date and make sure protocols are in place to deal with sick cows. Make sure dry cow and fresh cow programs are in place to maximize the health of the cow.
Often when you watch the numbers continuously like I do, it isn’t just one thing you can put your finger on in a business which is successful, it’s sweating the small stuff, doing little things incrementally better. Often it is as simple as actually taking action, challenging yourself, rather than just talking about doing it!
In agricultural businesses there’s no one size fits all model, you have to take the situation, fit it to your skill base, and then develop a successful business model. Being successful in business is an accumulation of information, experiences, and putting together the best model which is applicable to you. It also means knowing your strengths and weaknesses and finding the people who make up these gaps that you can work with.