‘Expansion for the sake of expansion is high risk’
There are common themes that are critical considerations for family farming expansion businesses during the transition to a milk quota free production. This is according to Brendan Horan, of Teagasc, Moorepark, who was speaking at the recent Positive Farmers dairy conference.
“The importance of written shared goals for the next 10 years for all involved in the farm is a recurring theme,” said Horan in his presentation.
“What type of life do we want for ourselves in the future? What will success look like for us? How are we going to realise that success?”
Other key points to consider include the important role of the farmer as a relationship manager within expanding businesses is evident from the speakers.
“Expanding farming businesses are extremely challenging and getting the correct help is essential,” he said.
“In addition to strong family values which are ever present in farming and evident again today, future farming will be more heavily reliant on various partnership types, more hired labour and more professional assistance and all such relationships need to be carefully managed.”
More formal working relationships based on clear communication will be a big challenge for expanding farm businesses, Horan stressed.
In terms of the annual two-day conference, Horan said the fundamental importance of a simple profitable resilient and repeatable farming system as the basis for future expansion was evident from the speakers.
“Low-cost grass-based milk production, compact calving, high EBI dairy cattle, an appropriate stocking rate and excellent agronomic management practices are the basis for a profitable system that can consistently meet repayment commitments.”
He said dairy farmers must avoid the temptation to waste energy ‘tinkering with’ production systems and endangering businesses either in terms of the efficiency of increased supplementation or increasing overall beyond the growth capacity of farms based on short-term market signals.
“Expansion must be based on opportunity rather than just for expansions’ sake – we must develop simple methods to evaluate expansion opportunities. We must develop simplified financial management and farm investment appraisal methods that allow us investigate dairy farm expansion opportunities that provide a reasonable return on our efforts and resources.”
Farmers must not expand just for the sake of expansion, he cautioned. “We must become more skilled at evaluating the true health of our existing businesses with consideration of existing cost efficiency, liquidity and solvency before embarking on further expansion.
In conclusion, Teagasc’s Horan said: “Listening to the speakers at this conference, I am reminded that expansion using borrowed money and without knowing what you are doing based on a well-conceived plan and budgets is very high risk. We must plan expansion carefully, budget and deliver on the budget, review regularly, adjust and improve as necessary and repeat the process.”
More than 700 people attended the two-day annual Positive Farmers dairy conference in Clonmel, Tipperary last week.