This is a subscriber-only article
Farmers need to put more effort into monitoring and controlling fixed costs, members of the Ulster Grassland Society (UGS) were told this week.
Speaking at the organisation’s AGM, Tony Evans from consultancy firm The Andersons Centre was critical of the level of fixed costs on many farms, particularly overheads related to machinery.
Evans, who is also a shareholder in three farms in England, said that the capital tied up in a new telehandler is equivalent to 70 cows.
“I don’t want to employ my capital in a piece of kit that on most farms is underutilised,” he said.
All three farms do have a loader at present, but the machines are only hired in.
My goal is to make fixed costs variable
“They arrive in November and they will be gone by March. We only bring them in when we need them and it’s not my capital that is tied up in them.”
His advice to farmers is to take the same approach to managing overheads as is generally taken with controlling variable costs, such as feed and fertiliser.
“My goal is to make fixed costs variable. There are too many farms with too many fixed costs,” Evans said.
He also encouraged UGS members to compare the balance sheet for their business each year to monitor how total farm assets change.
A lot of farmers are too busy doing urgent things and forget about what’s important
“The problem with benchmarking or looking at profit and loss accounts alone is that it is for that particular year, and does not show how you are improving net worth,” he said.
Newly elected UGS president Charlie Kilpatrick also offered some advice, stating that farmers should set strategic objectives for their business and make plans for longer term issues, such as succession.
“A lot of farmers are too busy doing urgent things and forget about what’s important,” he said.
Johnston family wins UGS grassland prize
The Johnston family from Ahoghill, Co Antrim, won the UGS grassland farmer of the year award at the society’s AGM on Tuesday. Harold Johnston runs a herd of 270 autumn-calving Holstein Friesians with his sons Mark and Jack.
They will now go on to represent the UGS in the British Grassland Farmer of the Year competition later in the year.
Newry dairy farmer Geoffrey Malcolmson won the silage award and Robert Patterson from Hillsborough, who runs a grass-based dairy-beef system, won the grazing award. Christopher Hamilton from Carrowdore, Co Down, received a special commendation award.
Welsh farmer Nick Davis converted to dairying in 2014, having previously operated an organic suckler beef and sheep unit.
Speaking at the UGS conference, he said the change was the direct result of low returns from suckling and sheep production which limited re-investment back in the business.
Prior to the move, 40% of all farm payments, including organic payments, were used to subsidise the farm before labour costs. Since the move, just 6% of farm payments (worth 1p/l) goes to cover all running costs, including borrowings to set up the business.
All setup costs were covered by the dispersal of 125 suckler cows and 700 ewes, alongside a £1.4m bank loan
The dairy herd was established by purchasing 580 breeding heifers from Ireland and the UK. A 50-point rotary parlour was installed along with a 600-cow cubicle house. Investment was also made in laneways, water, reseeding (135ha) and a large slurry lagoon.
All setup costs were covered by the dispersal of 125 suckler cows and 700 ewes, alongside a £1.4m bank loan.
The current dairy herd comprises 480 crossbred cows, with 120 in-calf heifers and 135 heifer calves on the 260ha unit. Cows average 5,425l on 1t/head of concentrate.
The farm is between 1,000ft and 1,420ft above sea level. Spring calving starts in March, with grass growth meeting demand around 24 April. Cows are milked indoors from October to January before drying off.
The focus is on producing milk from grass with high solids. The target is to produce 1kg of solids per 1kg of cow liveweight in each lactation, with 472kg of solids produced last year from a 475kg mature cow.
SHARING OPTIONS: