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Potter’s View: The inevitable impact of milk production

This month, Ian Potter looks at the financial pressures of milk production along with their inevitable domestic impact, and questions whether there is a future for all in the industry.

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Ian Potter questions whether the dairy has a future - Is he right? #teamdairy

Retailer aligned contracts account for about 12% of UK milk production, but scoop a whopping 20% of the UK’s total milk revenue heading towards 25%, according to my fellow Dairy Farmer hack and Provision Trade Federation market watcher Chris Walkland. For most of the remaining 88% of you it’s extremely tough indeed, and many are fighting for survival. One struggling farmer recently emailed me to say ‘the non-aligned continue to work like silly b***ers sinking deeper into the s**t while all around us the aligned walk on water at our expense’.

 

I don’t disagree. Today, there is an ocean of information pushed at dairy farmers, most of which is pretty basic, telling them what they should be doing to stay in business, how to cut costs and to be more competitive. One document which caught my eye was a set of questions emailed to me by lawyer William Neville of Savills. Having carefully studied these questions, the way ahead for a dairy farmer and his/her family should be clearer.

 

The questions were:

  • 1. Have you the mind set to take control of your own destiny, or do you feel bewildered and a hopeless victim of circumstances?
  • 2. Is dairy farming right for you and your family? What are your plans for inheritance? Are you doing the right thing for your non-farming family members?
  • 3.What will you need to invest in your facilities in the next 10 years? How will you fund it and justify it?
  • 4. Do you really know what your cost of production is?
  • 5.What is the realistic future for milk price? Are you looking at the evidence or living in hope?
  • 6. Have you worked out whether you are producing what your milk purchaser really wants? ie Are you maximising your return under your milk contract?
  • 7.What are you really paying yourself per hour? What can you afford to pay yourself and remain competitive? Would you be better off paying someone else and trying to add value to other parts of the business? What are your other skills? How much could you earn off farm part-time or fulltime?
  • 8.Might there be a day when you will find yourself stranded without a milk purchaser at all?
  • 9. Are you buying all your inputs at best prices, and when did you last check alternatives?
  • 10. Are you ruthlessly and honestly benchmarking your performance and constantly trying to identify ways to incrementally improve performance?
  • 11. Have you got your eyes open for niche opportunities even if they start small?
  • 12. Do you have the right skills for the technologically and market driven global dairy industry of the future?

I suggest every non-aligned farmer living in the real world goes through these questions with your family members.

 

Today, many dairy farmers face the most pressure they have ever encountered, with income crashing.

 

Individual performance may have improved, but workload and bills are increasing. Dairy farming and life on a farm is full of pleasures and challenges, and for many it has been a dream of a profession and an ideal place to bring up a family.

 

But now it’s time for many to face up to the fact their lifestyle is under threat and it could be the end of the line. It’s no longer possible to succeed by getting up earlier, staying out on the farm later and pushing yourself harder. The number of hours you work outside will not determine your success or failure as a dairy farmer, but it will push you and precious relationships to breaking point.

 

Faster or harder working hands are unlikely to turn around a loss making situation, and to those of you who have asked me when prices will return to normal, and quoting figures of 30-35ppl, I say this: you could be in dreamland. Nothing, but nothing, says normal will be 30-35p.

 

Normal could as easily be 24p going forward. Too many farmers I know, if they were honest, are married to their cows and the farm, and in second place comes the children, followed by the wife and the marriage unless (as in some cases) the dog comes in at number two!

 

At what cost do you intend to keep the family dairy farm going? Are you prepared to sacrifice everything – your own health and happiness, your family’s happiness, your marriage, or will you sacrifice the dairy unit to retain them all? It’s a massive decision to give up dairy farming but it’s not the end of the world.

 

It’s more you taking control and having a change of direction with new opportunities and challenges.

 

Sadly, recently I have heard of dairy farmers cashing in their pension just to keep the wheels turning.

 

Please – don’t be afraid of change, it’s part of surviving. And if you are aged c.40 plus and still reporting in to your father, who realistically still looks upon his son or daughter as a glorified farm worker who still needs his guidance, then my advice is to not put up with this situation and get out now.

 

And don’t get me started on those who have never had a proper holiday away from the farm, thinking that 30 years or so of consecutive milking is a badge of honour. Frankly, that is tragic.

 

One dairy farmer once said to me: “When I drive my car up hill I simply push down harder on the pedal.” To do that in an attempt to maintain your identity and dignity as a dairy farmer is unlikely to succeed.

 

Another reader asked me this: “Do I listen to my heart, my accountant, my consultant or my family?”

 

Easy answer this one: your family.

 

This article won’t give you all the answers, but I hope it stimulates debate and questions for you and your family.

 

Remember, you are not letting anyone down if you change and get out of dairy farming. But you will be letting yourself and your family down if you don’t change and do the best thing for your family.

 

Whatever you decide to do, good luck and I hope it works out for you!

About Ian Potter

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