Cash farming the focus for the next 2 yrs
21st Jan 09, 9:36am
Dairy farming in the next two years must be about farming for cash rather than milk solids , according to FarmWise Consultant, Ken Bartlett reports LIC. "A survival financial budget is what's required to ensure your farming businesses become cash rich and/or cash positive. "Calculate your income with this simple formula - Payout $????Kg M/s (Wait until Jan 27th announcement) Stock sales $ 0.30 Kg M/s Total $????Kg M/s." The next step is to factor in your costs. If we use Dairy Base information as at June 27, 2008, (this survey information is for 522 owner operators), the average gross farm revenue/Kg/MS/ is $4.61, (range $4.87 - $4.53 Kg M/s). Farm working expenses average was $2.80 Kg M/s (range $2.59 - $3.15 Kg M/s). Ken says the most important aspect to cash farming is a budget that concentrates on debt servicing, personal drawings and profit. The surplus in Kg M/s is what you run the farm on. "When it comes to farm working costs, there are three main areas farmers need to focus on "“ labour, feed and fertiliser. If the budget shows a deficit and there is insufficient money to run the business on its current system, after paying debt, personal drawings and profit, then changes need to be made." Ken says all these changes are personal and differ from farm to farm. Labour "It could be that some farmers need to be more involved in the operational running of the farm than they have been, or they may want to review the methods they employ with hiring, retention and management of staff." Feed. "Farmers may need to look at the supplements they are buying. If people are paying more than 5% of the milk price for supplements it's simply not profitable. For example, at a payout of $6.00/Kg/M/s the amount they can afford to pay 30 cents/Kg DM. Another approach is to look at the reasons supplements are being fed. If the stocking rate is too high, it could be simpler and more cost effective, to reduce cow numbers, keep the calves and/or heifers at home and reduce the amount of supplements fed." Fertiliser. "This is a good time to review the amount of fertilizer being applied, particularly for farm systems which have been receiving high levels. For example, over the next two years consider limited amounts of phosphate fertiliser or maybe just apply potash and sulphur." Nitrogen. "Now is the time to check the amount and timing of your nitrogen application "“ is it going on at the right time to deliver maximum pasture response? If not, change the number and timing of applications." Answering the "˜what if' questions Completing a financial budget often results in a number of "˜what if' questions "“ about the farm, the system and the farmer's personal situation. "Questions can range from "˜What if I go Once a Day early?', to "˜What if I dry young cows earlier to maintain body condition and save feed?' and "˜What if I drop stocking rate for the summer?' and it's only the individual who can answer them. "The important thing is to remain focused on a singular goal "“ a farming system that produces cash."