‘Dairy roller coaster ride ahead. Times for tighter management.’ – Dr Ian Lean
A large number of southern dairy producers are facing roller coaster rides with some months ahead returning troubling losses, Dairy Connect board member, vet and industry consultant Dr Ian Lean said today.
The managing director of Scibus said dairy farmers must know the cost of the fresh milk they produce on an on-going basis and, at the same time, track monthly market movements as part of their cash management programs.
“On the back of low milk prices, processor claw-backs and a global glut, things have definitely been better in terms of industry pathways,” Dr Lean said.
“Many dairy farmers produce cash-flow budgets in which they compare actual outgoings with those projected.
“This is definitely recommended and producers should do this working with trusted advisors and / or their banks.
Cash-flows are important tools as they provide frameworks in which seasonal costs can be estimated so variations in monthly income and outgoings do not cause undue stress.”
Scibus is a respected professional consultancy that delivers farm advisory services to dairy businesses across Australia.
Dr Lean said the consultancy recommends monthly monitoring of costs and outgoings in a structured budget that includes financial costs, including loans and leases.
“Once a year, there is a need to assess equity positions and evaluate changes to land values and stock. This should be done outside of a taxation context to reflect market changes,” he said.
“It is important that producers are aware of the big picture because with tight milk pricing, month-to-month cash flow fluctuations can be confronting and will need clear lines of communication with banks and other lenders.
“Many Victorian, Tasmanian and South Australian farmers and some in NSW, will experience months where losses are large.
“Forward estimates of income and costs are critical to managing movements sensibly to ensure human and livestock wellbeing.
“This process is greatly helped by the early, timely release of future price projections by processors.”
Dairy Connect CEO Shaughn Morgan said peak industry body Dairy Australia had recommended that producers sign up to a program called ‘Dairy Base’ in which they can enter their production information in standardised formats with others.
“Dairy Australia is very positive about this program and it has been a major initiative,” he said.
“The program is doing a good job with improving financial literacy in the sector.”
Ian J Lean BVSc, PhD (Calif), DVSc (Syd), MANZCVS
Adjunct Professor, University of Sydney
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