Rodney Down publishes his report for The Trehane Trust on Dairy Expansion

Rodney Down.jpg

Executive Summary

  • The larger herd size does not automatically lead to increased margins, usually the opposite. 
  • Paid labour units associated with large herds are more difficult to control than ones with equity partners/share milkers or family members as they have a personal stake in the business. 
  • The market for the milk produced needs to be reflected in the production system.  Volatile milk prices (hard dairy products) need to be produced by least cost producers.  Retailer aligned even milk supply must receive a premium for increased costs of production and infrastructure associated with such systems. 
  • Expansion needs to happen in the right place in terms of the environment and resource availability and sustainability.   
  • Land ownership is essential as the biggest growth comes from land appreciation over the long term. 
  • The best businesses think about profit first then production.   
  • A mixture of housing and grazing can work, especially in the UK. But all costs must be kept under control.   
  • Make sure you are the right person for your role in the business. 

Recommendations
1. Scrutinise every part of the business before expanding. You will often find inefficiencies that can be addressed to give increased profits before expanding. 
2. When you have got it right replicate it on another unit with the help of a partner or share milker. 
3. Match the marketplace with your production system or match your system to the market place if you have not already done so. 
4. Measure, record and benchmark against the best performers.  Know your cost of production.  
5. We grow forage easily with an abundance of rainfall.  This can lead to a lower cost of production through less bought- in feeds if utilised correctly.  Measure, record and utilise better.  
6. Feed input responses will vary on each farm. Are the systems in place to get the most out of your inputs, water, dairy cow housing, parlour design, staff expertise and training? 
7. Look at potential extra earners, such as methane and slurry nutrients.  
8. Don’t let your costs increase to meet the milk price.  Keep rigid control of them through budgeting and planning.  
9. Keep your eye on the profit margin not how full the tank is and lock into input and output prices whenever possible to create a guaranteed margin.   
10. Make sure the management style and breed of cow matches the marketplace and your production system.

Read the full report here