With the dairy sector facing significant challenges, Cedric Porter asks Tony Evans, senior business consultant at Andersons, for his advice on changes which farmers can make now.
Assessing the impact of the Covid-19 crisis on your dairy business is the first step in putting a survival strategy in place.
Tony Evans, senior business consultant at Andersons, urged farmers to do their budget and understand where they are and would have been going in terms of profit and cash without the impact of Covid-19.
He said: “You need a benchmark to compare to. If you do not you are running the risk of shooting in the dark and not understanding the impact of any changes you may have to make.”
He advised farmers to communicate to all those involved the possible impact of the crisis and invite ideas for savings from staff and others who will have to apply them.
He said: “There are many things which can be done, but only with knowledge and buy-in from all involved. If you manage on 10 per cent less of everything, you could save 2-3ppl.”
Mr Evans urged full and frank conversations with milk buyers and input suppliers to get a greater understanding of what they might be able to offer and possible impacts on cashflow in key areas, such as lower milk prices, reduced production or higher feed costs.
There may also be the opportunity to bank some savings on forward buying of fuel and fertiliser.
He believed now might be the time for some calculated innovation, especially around feeding cattle, but urged farmers to learn from others who had already made changes and have shown they worked.
Taking advantage of very low interest rates might be sensible, but only after careful consideration of what the money would be used for and how it would be repaid.
Mr Evans added: “Borrowing £50,000 should cost you no more than 3-4 per cent in interest or £1,500 to £2,000 a year plus the arrangement fee. But paying the loan back might be difficult for a business which was already marginal before the crisis.”
He also urged farmers to carefully consider any planned capital investment and ask themselves ‘do I really need this now’.
One area he advised particular caution was cutting back on labour.
He said: “Remember people are those who make changes happen. Only consider cutting back if there is less work for them to do and then explore doing it through the Government’s furlough scheme.”
Although these were exceptional times, Mr Evans warned farmers to be very careful not to take drastic short-term measures which could do long-term damage to their businesses.
However, he said: “Plan for the worst, then hopefully get some positive surprises later on.”