Understanding your risk in uncertain times

The impact of the COVID-19 lockdown is now affecting farmers across the UK, and milk buyers are either requesting a decrease in milk supply, reducing the price, deferring payment or, in some cases, a combination of these. LIC’s Pasture to Profit farm consultant Sean Chubb has come up with some clear-cut advice to help dairy producers through these challenging times.

Sean says, first up it’s important that farmers act to secure their profitability, and most importantly carefully think through all options rather than making knee jerk reactions.

“If you’ve not already reviewed your budget, do it now,” he says. “Can you answer these questions?

  • What is your breakeven milk price?
  • What costs can you forgo to lower your breakeven milk price?
  • Does a lower milk volume in this climate return more profit to you?
  • What can be done if these conditions prolong into next season?

“Knowing your breakeven price shows you how any movement in milk price will affect your profitability and allows you to plan accordingly. Remember that farming is a long game, so there’s no point saving £1 today to lose £3 tomorrow. In other words, don’t pull out feed just before mating if it’s going to impact on your mating results.

“Grass is your cheapest form of feed, so ask whether you will be more profitable at a lower stocking rate where grass will make up a higher percentage of intake. It’s easier to cut costs before the start of the season than once you are in it. Once you’ve reviewed your budget talk to your bank, suppliers and staff to let them know of your position, so you have time to discuss options.

“Get the full story your milk buyer. The factory that your milk goes to might be supplied predominately by autumn block farmers, so your peak and summer milk might be needed more than what the company’s widespread message is letting on.

“Knowing the product mix that your milk buyer sells, and how this is affected at present will enable you to assess the risk of future actions and help you to come up with contingency plans to mitigate these risks as best as you can.

“In these uncertain times it’s important to unleash the full power of your network. Whatever you’re trying to work out, or get done, someone has probably either already done it or has found a way around or through it.  LIC’s Pasture to Profit consultants have many years’ experience in dealing with industry issues, and they are available for consultations over the phone or video conference.

Get in touch with your local consultant for timely advice or help.

by LIC
Livestock Improvement Corporation Limited
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