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Decisions4Dairy - It’s not what you do, it’s the way that you do it : system change

It’s a really positive thing to know you want to make changes for you and your business. So what could these changes be? It’s likely that if you have come to this conclusion, a small change isn’t going to make a big enough change to deliver what you want to achieve. 

Two options that you might be considering could be a system change or becoming a part of a joint venture.

Looking at a change of system? An example could be changing calving pattern

In a previous series of articles around cost of production, we took a look at the implications of changing from all-year round calving to a block calving system from an industry point of view and on-farm.

Moving from all-year round calving provides you with a number of opportunities and limitations on-farm as demonstrated below:

Capture Story 4.1 

Source: Adapted from Autumn Block Calving factsheet, Farming Connect                   *From AHDB analysis

Block-calving systems are not suitable for everyone. However, the potential financial benefit is great enough that you should at least ask the question as to whether it would work for you and your farm.

Due to the pressure that can be put on cashflow and the potential need for capital, it can be really difficult to see how you can make any change when your business is already under stress. Getting off the treadmill can seem impossible but siblings Ian and Lucy Mansell, from Shropshire, made the jump. 

In the summer of 2013, the herd at Brookhouse Farm, 300 acres near Oswestry, had developed into a 170 herd, milking three times-a-day, with an average yield of 10,500 litres per cow, on 3.6t conc/cow. With only Ian and Lucy, and some part-time help from a relief milker working on the farm, it felt as if it had become a non-stop battle with fertility, mastitis and lameness issues.

“It was an incredibly complicated system,” says Ian. “All we had was wagon after wagon coming into the yard delivering things we’d had to buy to keep the system going. We were either milking, feeding or scraping out; we had no time for developing the business. We were tired, the cows were tired and the farm was tired.

“Fundamentally, it was not a profitable system for us, and we knew we were looking at a high level of investment just to keep it going as it was, something had to change,” he explains.

Ian and Lucy sold or sent barren a proportion of their herd and replaced them with a more robust breed to join their remaining cows; that has proved to be a great saving on vet and med costs for their now grass-based, block calving system.

Ian and Lucy sold much of the farm’s machinery, making huge savings in repair, insurance and fuel costs, to help improve the infrastructure, such as tracks, fencing and water provision.

“We’ve saved over £2,000 on fuel for the feeder wagon alone,” says Ian. “Imagine that multiplied by all the machines we had running all day, every day. I’ve even sold the molasses tank to stop me being tempted to ever fill it up again!”

When you’re considering a change to your business, take the time to get out see how others are doing it, and understand how they made their changes.

“All the farmers and consultants we talked to as we investigated grassland systems were incredibly helpful and open with information. It was clear from the start that these were profit driven businesses, where the farmer was in control,” says Ian.

Lucy and Ian admit their mind-set did have to change. They have trained themselves not to look at milk in the tank but the profitability of the business.

“We are in control now,” says Ian. “We no longer have wagons rolling in all the time costing us money. We have the time and energy to think about and develop our business for the future. The other day, the vet greeted us with “Hello strangers!” I think that’s an indication of just how little we see him and how well this system is working for us, not the other way round.”

 

Observation from Tony Evans of Andersons:

  • Capital needed for conversion can be realised from sale of no longer required plant and machinery already on the balance sheet otherwise you are just employing more capital and increasing the Return on Capital (ROC) demand
  • Dairies and retailers are happy to embrace the change by pro-active communication
  • Cost of working capital to change could be converted into a “loan” and paid back over a longer period to facilitate the short-term cash needs
  • You need to budget and cashflow any changes in the current account to see peaks and troughs in working cash position
  • The cash needed to change varies hugely – it might not be as much as you think.

 

This is one of a series of articles on mindset.  Read more on this and Decisions4Dairy – an industry-wide initiative to support farmers in challenging times so they can become more robust for the longer term at dairy.ahdb.org.uk/d4d.