Choose a category that best matches your situation, hover over the question mark icon and a pop up box will list actions you could take to help you improve your position.
Owner Operators 2015/16
- Farm in a deficit position (85%)
- Farm in a cash surplus position, before drawings, tax and capital (15%)
- Cash income $4.40
Note: Owner operators with low levels of paid labour may appear to have low farm working expenses however may have another $0.50+/kgMS of drawings.
50/50 Sharemilkers 2015/16
- Farm in a deficit position (70%)
- Farm in a cash surplus position, before drawings, tax and capital (30%)
- Cash income $2.05
Management strategy options
As low milk prices continue into a third season you may be looking to make some changes. Below are some management strategy options.
Farm working expenses
- Start with the big cost areas of feed and fertiliser and then work through each other cost area. A thorough assessment is required when cutting costs as in some cases revenue may drop more than costs saved.
- Be cautious about cutting labour unless you are considering a change in farm system that requires less people to run it.
- Consider a farm system change if costs require a significant reduction.
- You can manage cows through winter and spring without purchased feeds by ensuring stocking rate, pasture cover and crop yields, and cow body condition score are correct at the start of calving, and the Spring Rotation Planner dictates area of the farm allocated/day.
Drawings and dividends
- A reduction in drawings maybe required and may require a change in living standard. Consider developing a personal budget to help achieve any required reduction in drawings.
- Clear communication to shareholders is required if dividends are to be reduced.
- Review all non-essential capital expenditure if financial situation requires this.
- If the business is in a strong financial position the cost of capital projects may be able to be strongly negotiated making this a good time for essential capital expenditure.
- Optimisation taxation planning with your accountant.
Increase revenue - all quadrants
- Through optimum stocking rate, calving date, genetic quality and grazing management pasture eaten per hectare will be optimised thereby increasing cost effective milk production.
- Maintain a focus on animal husbandry and reproduction to minimise stock losses and empty cows thereby optimising stock revenue.
- Other revenue streams such as forestry, surplus livestock.
Off farm income
- Someone in the family may be able to start earning off-farm income that is higher than their replacement on the farm.
- Other ideas - AI run, part time work.
- Fund cash deficits by increased bank borrowing (overdraft and term debt) is a short term strategy however if this continues for too long it will put the whole business at risk.
- Possible investment opportunities for businesses in a solid financial position.
- Borrowing maybe an option for some however it is important the business is in a stable position and not deteriorating as this could mean the family money lent may be put at risk.
- Family members or business partners may be able to offer some level of ‘security’ or personal guarantees to the bank, but again this does put their assets at some level of risk.
Outside equity from family members or investors could be introduced to reduce debt levels.
- Review dairy company share requirements to align with production
- Consider selling non-core assets such as
- off farm investments e.g. shares
- non-essential items such boats, expensive cars, surplus machinery etc
- holiday houses, rental properties, sections.
Core farming assets
- In some cases due to high debt levels and cost structures selling the core assets may be necessary. Seek sound support and advice to assist with this decision.