Ian Browne (Stafford)

Having once again completed a round of CFP (Comparative Farm Profit) meetings for predominantly block calved herds to the end of December 2025, several points stand out strongly.  Firstly, the year to the end of December 2025 must surely be one of the strongest years most people have ever experienced.  Profits have been high, and free cash has been generated.  How well has this cash been utilised?  Those that have handled it wisely have managed to pay down creditors (thus making their businesses safer for the future) or paid off / reduced debt (loans and HP) significantly.  The prudent have secondly been aware that next January 2027 may see a very large tax bill that will potentially have to be paid for on the back of a poor year.  Thus, some cash has been “saved” for that event.

The inevitable has since occurred; the pendulum has swung to the other extreme and we are now faced with very low milk prices for the coming year.  This will be challenging to say the least.  While livestock prices remain high, the main dairy farm income will fall by up to ~ 25% or ~ 12-15 p/l.  This in many cases will wipe out the previous profits made.  The one hope is that the overspend most people experienced last year on feeds and forage due to the dry weather, will see some savings being made.  At this point it is worth noting that the extra costs last year could have been a lot worse, if it had not been for the large forage carry over into the year.  This “insurance” quantity of forage was important in helping get through the particularly dry period some experienced last summer.  Is there any carry over to help cushion this year if the weather does not play ball?   Should we plan to carry forward an “insurance” supply of excess forage to help when future issues occur?  I believe we should and accept that this “insurance” needs to be reestablished.  This effectively amounts to the “insurance premium” and ideally would equate to about 50 days’ worth of forage DM i.e., 600 kg DM or ~ 2.25 tonnes of silage per cow equivalent (over 500 t silage for a 230 cow herd).  As the weather cycles become more extreme and frequent, this strategy would seem to be more sensible for farmers to adopt. 

Another angle relating to the same problem relates to overall stocking rates.  The farms that had a lower stocking rate of nearer to 2.0 cow equivalents / ha suffered less problems from the weather, being able to survive grazing for longer.  This saw a reduced amount of forage purchases being made.  However, the more extreme stocking rates of over 2.5 cow equivalents / ha spent more on feeds and have left their farms in a worse condition entering the next season.  While higher stocking rate may raise the risk levels, it is not an insurmountable issue.  You must know where you stand and set about buying in adequate feeds early to ensure the business is not caught out.  The reality is, should we be rethinking our strategic approach in terms of stocking rate and feed budgeting?

Having experienced the start of the pendulum swing, should we now make other changes to our approach to the business?  Probably we should.  When times are very good, we start to see complacency creep in with a slightly relaxed attitude to querying inputs and costs.  What has occurred over a very short period is the huge change in fortunes.   Due to the speed of change, there is a need to regain focus rapidly.  We must query all inputs but equally must be very aware of which ones are important and when they are relevant i.e., prioritise.  What are the consequences of altering an input both in the short and longer terms?  The law of unintended consequences may bite you and can lead to destruction of profit and production.  Caution must be taken to avoid overreactions to a situation.  If you have a farming system that works, persist with it.  It is important to follow your correct method of farming and see it through.  This may mean that you lose some money this year, but you will survive to live another day.  What is clear is that the farming and economic cycles roll on.  Prices will improve and stabilise again as we have seen so many times before.  Effectively when times are hard, “Cash is King”.  You need to be fully aware of costs and prices per item.  Buy well and do not buy unnecessarily.  Know the risks to your business and plan to mitigate or avoid these areas.

Finally, it is always worth remembering that those who plan ahead and understand their businesses well are the ones who fare best.  Budgets allow you to anticipate where problems may occur and thus enable you to deal with them before they become a crisis or embarrassment.

For help in planning your dairy business in the next twelve months, contact Ian at ianbrowne@fcgagric.comor your local FCG Office.