Ian Browne (Stafford)

During the latter part of January, I have completed the benchmarking exercise (Comparative Farm Profits or CFP) for a number of discussion groups, situated in different parts of the country.  These 50 plus dairy farmers are all focused on their businesses (probably in the top 25% by profit of dairy farmers) and tend to be block calved herds.  They have carried out benchmarking for many years and are aware of the messages that arise from the discussions and appreciate the opportunity to compare notes with each other.  It is never a “race”, rather a chance to learn from each other and see what has worked well etc.

There has been considerable cost creep over the period.  The total costs for one group were ~ 31.7 p/l in 2021, rising to over 38.6 p/l in 2022 and settling at nearer 40.7 p/l in this last year.  The summary figures are shown in the below. 

While this was looking at one group, it was also typical of all the others to a greater or lesser degree.  The direct or variable costs have seen a general hike in prices and while they are now falling, they will not get back to where they used to be!   It is also very noticeable that the cost of overheads and in particular labour, and energy costs have continued to creep upwards.  Again, this trend is likely to continue.  Why are some farmers faring better than others?

One thing does seem to stand out within the groups: variability.  The range of costs appears far wider than we have normally experienced between group members.  It is as if people after a really good year have let complacency creep in.  This has occurred before, and it is important that we regain focus quickly.   The top 25 % have remained committed to their businesses and it is obvious that they have not suffered as much as others.  For instance, the total purchased feed bills have ranged from ~ 7 p/l to over 14p/l i.e., double and yet the members are all on basically the same systems.  This occurs in all areas and typically the total costs range from ~ 35 p/l up to 45+ p/l (the very best business managed 33.8 p/l on this benchmarking system).  Simple systems are easier to control and monitor.  It is better to follow half a dozen KPIs (Key Performance Indicators) and really maintain a close eye on these, as they will give you the greatest chance of realising good performance.  Achieving Efficiency is probably the main difference between the group members.  This is what separates the best from the worst in terms of business results.  Another point arose very clearly when the top and bottom quartiles were examined and highlighted in coloured.  The best businesses were often the ones which were never the best or worst in single areas.  However, they were always above average and paid great attention to detail in multiple areas, thus shining in all aspects of the business!

Analysis of the business is essential for everybody.  Plan to have a simple system that is repeatable and then set about achieving the targets set.   “Boring” businesses are often the most profitable and cash generative.  The problem with boredom is that people start tinkering …   Don’t !!”

For assistance to benchmark your dairy business with up to date comparables, let us challenge you to challenge your business and improve your areas of weakness and fortify your areas of business strength by contacting Ian at ianbrowne@fcgagric.com or your local FCG Office.