11 Aug Are you considering converting to dairying?

The spike in agricultural inflation, cashflow pressures and uncertainty surrounding the ability to recover reduced BPS amounts through future environmental schemes is placing many farm businesses at crossroads about their future strategy.

One option which is increasingly being discussed is converting to dairying.  It ticks many boxes for businesses but the decision to convert your farm to a dairy farm is probably one of the biggest decisions you’ll make on your farm.  Converting to milk production involves a major personal commitment and sizeable capital outlay. Therefore, you need to be sure you are making the right decisions.

Here are some steps to consider:

  • Develop a physical plan for the farm to include milking and grazing infrastructure, animal housing and slurry storage;
  • Develop a capital budget for the farm to quantify the total cost of converting to an operational dairy farm;
  • Speak to milk processors to secure a contract which fits with your physical plan and cow type;
  • Construct an operational budget for the farm to quantify the total costs and total income generated annually;
  • Develop a timescale plan for the conversion of the farm;
  • Taking actions to manage risk – disease, financial, health etc
  • Managing the conversion phase

The capital budget should identify the need to secure any planning permissions or secure funding, for either allow 4 to 6 months for this.

The appraisal should also be stress tested at a lower milk price and include a sensible opportunity cost for unpaid labour.  The latter should be compared to the alternative of for example working off farm as, depending on the system, dairy farming can typically be more labour demanding.

There are many other factors to consider within each of the steps highlighted above.  One recent analysis completed for a customer highlighted the capital costs were too high due to current agricultural inflation, in this example the business would actually be better off moving to a dairy farm where the infrastructure was already in place to achieve its aims.

Choosing the correct business strategy to meet your personal and financial aims requires lots of thought and analysis. For advice and support for your farming business please get in touch.