Quick check could save thousands
Not far from farmers’ minds are the regular Global Dairy Trade auctions.
Last week’s auction showed no movement overall – far better than prices going backwards, but also a stark reminder of how long we have to go before we get back to the glory days.
Next month, all eyes will be on the Reserve Bank as to whether the official cash rate is dropped and in turn, a wait and see game on whether it’ll impact on rural lending rates.
But right now dairy farmers’ time is absorbed with calving; rightly so.
Some farmers see these low milk prices as a way to fine-tune their business, even more so than they initially thought possible.
Although the financial budgets for the season should be set, there is still an opportunity to make changes.
Reviewing your budget is not time-consuming. It’s a quick look to make sure your initial expectations of costs and income are still accurate, and updating accordingly.
For example, farmers who have signed stock feed contracts with an agreed price should update their budget to reflect this price.
Often overlooked in budgeting are grazing options for young stock.
It is easy to do what has always been done without evaluating whether that’s the best decision.
Whether calves are sent off the farm once weaned or kept on the farm until they enter the herd, the decision needs sound reasoning.
When milk prices were higher, it was often more profitable to graze young stock off the farm, retaining grass for making valuable milk.
But for farmers who have recently reduced herd numbers due to low milk prices, there may be an opportunity to keep some weaned calves on farm and not graze off until May 1. These few months saved in grazing costs could slash thousands of dollars off the budget.
Remember to always assess the entire farm situation, including factors such as stocking rate and feed requirements, financial and physical benefits and constraints for each scenario, as well as your expectations of milk price over the coming seasons.
Carefully consider any change.
Undertake a cost-benefit analysis for all the scenarios, showing the impact of varying milk prices will help to establish whether your farm is more profitable to graze young stock on or off the farm, or a combination.
Taking a few minutes every couple of months to review and update your budget will help to ensure you are on track and getting the best out of your farm.
❚ BDO Taranaki specialises in rural business advisory services and its rural experts write a monthly column on financial issues affecting farmers. An independent member of the BDO NZ accounting network, BDO Taranaki’s Principal Mark Irving is Dairy Head of BDO NZ’s Agribusiness Sector Group. YLG HEIFERS Friesian AUT BORN HEIFERS Herefordx Hereford Friesian RWB HEIFERS Friesian MTCOWS Friesian Friesianx Xbred 106 112
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