TEAGASC has come up with advice on the best approach for dairy farmers to take to help them get through the low milk price regime that looks set to continue throughout 2016.
‘Milk price volatility is here to stay and farmers will have to take steps at farm level to manage it to protect their business’ was the message from Dr Padraig French of Teagasc, speaking at an open day on the Greenfield dairy farm in county Kilkenny, which was sponsored by AIB.
‘The milk cheque in 2016 will not cover all the costs including family drawings, principle repayments and tax, incurred on dairy farms this year, and individual farmers need to quantify the size of the problem on their farm and focus on a solution,’ he added.
Teagasc is recommending a five-step approach to manage through 2016:
· Understand your current financial position.
· Explore the options available to you and develop a plan.
· Take action keeping the basics of good farming in mind.
· Focus on financial management.
· Talk with and involve family members and your ‘support team’.
Finally, remember the sooner you take action the more options will be available to you. The industry is experiencing a downturn in milk prices at present, but prices will turn.
‘Coping with low milk prices in 2016’ was the theme for the open day and Teagasc advisors facilitated small groups of farmers to participate in cash flow workshops at the event. These workshops concentrated on the steps needed to generate cash on farms.
The Greenfield dairy farm is now half way through a 15-year lease, having been set up over seven years ago. Teagasc researcher Laurence Shalloo outlined how over this period they have taken three steps to manage milk price volatility on the farm:
· Manage the break-even milk price by increasing the value of milk produced or reducing costs.
· Avail of the fixed price milk schemes offered by the milk processor.
· Create cash flow reserves.
In relation to these three steps for managing volatility, Laurence Shalloo pointed out that:
1 In 2015 this farm produced milk with a protein content of 3.87% and butterfat of 4.64% which is adding significant value to the milk over the base of 3.3% and 3.6%.
2 Around 25% of the milk to be produced in 2016 is already sold at a fixed price, which is projected to be worth just over €26,000 in 2016, or nearly 2c per litre.
3 A cash reserve of €125,000 has been set aside over previous years for low price periods like this year.