5 actions farmers can take to help deal with milk price volatility

In its latest advisory update to dairy farmers Teagasc outline some key actions farmers can take to deal with milk price volatility.

Teagasc point out that the Irish Dairy Board (IDB) PPI(Purchase Price Index) has dropped from 133.5 in February 2014 to 114.8 in August 2014. It say different global events, including an increased global supply of milk and the Russian ban on EU imports, have contributed to this trend. According to the IDB “the market situation looks challenging in the short to medium term”. This market weakness has led to a number of milk processors dropping their August milk price. Notwithstanding this, the long-term outlook is still positive: global population growth coupled with increasing incomes and a focus on nutrition continue to drive demand for dairy products.

Teagasc stress that dairy farmers must keep these market developments in mind when making both long and short-term decisions concerning their farm business.

Teagasc advice in light of these developments?

  1. You cannot afford a Super Levy bill next year. With milk price under pressure, you cannot afford to pay a penalty. If you are over quota, you must take action now to minimise your bill.
  2. Plan to have a cash reserve built up at year end to carry you through the early part of next year. A figure of €250 per cow was suggested at the recent Irish Grassland Association (IGA) Summer Dairy Tour. So for a 100-cow herd, you should have €25,000 in the bank at the end of the year. Can you achieve this?
  3. Avoid funding capital investments from cash flow. Your business may run short of cash in the future as a result.
  4. Complete your Autumn Grassland Management Plan now to ensure that you have plenty of grass on the farm next spring.
  5. Complete a monthly cash flow budget for 2015. Set the time aside over the next two to three months to do this. Involve other family members and your local Teagasc adviser.
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