How to build farm business resilience

Building a resilient business is vital for withstanding variations in milk price and input costs. James Hague, AHDB Knowledge Exchange Manager, hosted a webinar with John and Anna Booth from Rhual Dairy and Oliver Hall, Senior Farm Business Consultant at The Andersons Centre, to discuss how their team can ensure they are managing a resilient business.

Feed

Variability in our weather is the new norm. It’s important to consider how to prepare for that in your business and look at what you can do today to make your businesses more resilient to extreme weather.

Quantifying and measuring forage growth, such as by measuring grass through plate metering and recording weekly, can help you monitor the situation.

Oliver explains: “Monitor what your crops are yielding year to year and where you are at in terms of how much you’ve grown this year, and how much you need to grow. Have a back-up plan. At Andersons, we recommend having 1 tonne DM/ha, or 30 days feed, at springtime left over when you’ve finished your forage cycle. This can be achieved by making surplus in a good year or buying in some forage locally if price is subdued.”

John says: “We’re a dry farm so it’s important that we’ve got some cover. We did run out completely in 2020 so had to buy forage in and it was very expensive. We usually manage to keep about 200–300 tonnes to carry forward.”

Cows

A good principle of resilience in a dairy farm is to view your herd as a working asset. You must constantly spend either money or time on protecting those future returns.

“A really good herd of cows can take years to build up, and sadly only a few years of poor management, or something going wrong, can lead to a serious problem,” says Oliver. “You need to look at what you’re doing to protect the future of the herd to make money.”

It’s important to focus on the health of your herd to protect your future returns.

John says: “At Rhual Dairy we vaccinate for Leptospirosis and IBR (Infectious Bovine Rhinotracheitis). We don’t have any trouble with Johnes, but we have had a big issue with Neospora in the past. We have managed to lower cases by treating it much like Johnes, snatching cows and cleaning boxes, culling out infected ones, and not breeding from anything that’s had it.

“We are BVD (Bovine Viral Diarrhea) free, but we do vaccinate heifers for BVD as they’re on the periphery of the farm and may come into contact with other cattle, so we are future-proofing them.”

People

A professional workforce is vital to improving your business performance. Developing and retaining your current staff, while improving recruitment of the next generation is key.

Oliver explains: “For a large business, a good target is 15–20% turnover per year. With a smaller team, 5–6 years length of service is seen as optimal. Sometimes not enough turnover can lead to a lack of fresh ideas.”

The previous herdsman and tractor driver worked at Rhual Dairy for six years and ten years respectively. The current herdsman has been there for two and a half years, while the replacement tractor driver left after seven months.

John says: “We’re a small team. There are only four of us but we try to keep everyone involved in the business and make sure everyone knows what’s going on, and we would like to continue this going forward. For the previous team members, it came to the time where they needed a new challenge and that’s why they moved on.”

It’s important to have contingency plans in place when dealing with absences. It’s worth considering how easy the farm is to operate and how good the protocols and communications are.

Oliver adds: “Focus on making your farm a great place to work and you will attract good people.”

Money

A more resilient business will have high margins as a percentage of turnover.

Oliver says: “Andersons set a target of 30% profit pre rent and finance, and it’s important to achieve this consistently for five years. You should also try to generate a return on capital that is higher than the cost of funds, with a target of 4% higher than the cost of funds.”

One of the AHDB KPI targets is the return on tenant’s capital. This can be calculated by adding up all the tenant’s capital (cows, machinery, tenant’s infrastructure) and then dividing your profit after rent, even if you own the land.

Oliver adds: “You always want to have long-term wealth creation goals with an eye on retirement or long-term objectives. What does your retirement plan look like and where do you want to be in ten years? All those things need to be worked back to your yearly targets to help create more structure in them.”