A number of milk processors have asked farmers to reduce milk output and some have introduced a two-tier pricing structure with B milk being very low in value as sold on the spot market. People forget that it is not as simple as turning off a tap to reduce milk volumes. It requires careful management otherwise actions can have a negative impact on the future of the herd performance, when hopefully these restrictions are only short lived.
There are three areas to consider when trying to reduce milk output and the financial impact of lower milk prices.
Firstly, work out what the shortfall in cash is going to be so that you know what you have to achieve with cost cutting. Can you introduce own funds short term to cover this shortfall? If not:
• Non-essential costs should be cut, drop the “nice to have” expenditure for the time being.
• Target non-profitable animals on the farm and remove. This will bring in some cash and also reduce costs.
• Sell off surplus stock if able and sell any surplus equipment to help generate cash.
• Drop from three times a day to twice a day milking.
• Furlough staff if possible, especially if you have to reduce herd size and/or stock numbers.
• Talk to HP finance companies about capital repayment holidays on machinery.
• Delay VAT and income tax payments.
• Don’t chase yields to dilute costs.
• Don’t be too radical as this is hopefully a short-term problem and you will still need to have a profitable business once we come through this current crisis.
The key is to make sufficient changes, but not to go too far that you create longer term problems. The aim should be to reduce B litres, (lower price) litres. Consider:
• Bringing forward culling.
• Selling fresh calved cows.
• Increasing number of cows grazing rather than housed.
• Cutting out high protein feeds.
• Dropping supplements and fats.
• Using whole milk for feeding calves, subject to Johnes restrictions.
• Conserving the higher quality silage and saving for the autumn when you will want it to boost output.
• Targeting feed reductions to mid and late lactation cows. Grass should produce 16 to 18 litres at the moment.
• Aim to drop concentrates to mid and late lactation cows by 80% but protect early lactation animals as they need to get back in calf.
3. Animal Health
The key is not to make decisions that will have long term impacts on cow health, fertility and body condition.
• Cull out the bottom 10% of the herd; most people find that doing this doesn’t impact on milk output significantly as the remaining cows perform better.
• Continue with routine vaccinations.
• Protect cows in first 120 days of lactation and ensure that body condition does not drop more than normal.
• Don’t change the transition diet as cows still need to calve in properly and get back in calf.
• Continue to maintain cows’ feet, not an area to cut costs, particularly if they are walking further than normal to graze.
• Don’t pool milk to feed calves as this can create Johnes problems unless you can pasteurise it.
• Don’t stop investing in the heifers which are the herd’s future so continue to manage them as normal.
The important thing to remember with this is to ensure that decisions you make now will not have significant long-term impacts on the future of the business. Start by planning your cashflow and working out what the impact is on your bottom line and then make decisions to mitigate this impact.
If you would like help in working through this process, please contact Phil at firstname.lastname@example.org or your local FCG office.