Dairy farmers warned about the risks of post-quota expansion

Dairy farmers need to learn from the mistakes of the property boom and not leap into post-quota expansion just because everyone else is doing it, warns risk assessor John Crawley.

A former banker and property developer and currently a business turnaround adviser for Dublin Docklands Authority among others, Mr Crawley is also the founder of Dublin-based business consultancy, The Finance Expert.

“Dairy farmers need to look at their costs, their increased herd and silage and compare that figure with the price they believe they will get for the milk,” said Mr Crawley. “Then they need to realise that it may take 10 years to get this right. I’d compare that to the economy in Northern Ireland, which took a decade to settle. We have been in an era of price supports for a long time, farmers need to ask themselves how tough life would be if that were to start to unravel. When you look at those numbers and those questions, you need to ask yourself if the end of the quota era is an opportunity of a lifetime, are you happy staying as you are, or is this the logical time to pass the baton onto someone else.”

Mr Crawley delivered a governance programme for the Ryan Academy in DCU, run for ICMSA members considering their post-quota options. He is also one of the speakers at Dairy Ireland’s annual conference in the Firgrove Hotel, Mitchelstown, Co Cork on Thursday, Jul 25.

Titled ‘Moving Forward with Confidence’, the post-quota themed conference will also look at Dairy Ireland’s new ‘Milk Pricing Policy’ blueprint for pricing transparency post-2015.

“I know that most of the people in Mitchelstown for the conference will know exactly what I mean when I talk about the danger of following the lemmings buying a property in Bulgaria during the 2003-08 boom years,” said Mr Crawley. “We all thought it was a good idea. The banks put up the money. We all believed in it, but it didn’t turn out to be true.

“With dairy expansion, people cannot abdicate responsibility for what is a totally personal decision. They can’t expect someone like me to make the decision for them. If we all stopped and did a simple calculation and looked 10 years ahead before buying properties in 2003, we wouldn’t be in the manure we’re in right now.”

Farmers must ask themselves what their models are? What are their ‘sacred cows’ in their lives, the things they cannot live without? What assumptions can they make about price for the milk they supply? And, if the banks offer them money for new sheds, increased herds, land or equipment, how long will they be paying that back?

“When you’ve done all your numbers, ask yourself if you can live with being 10% wrong on some or all of your calculations,” said Mr Crawley. “Ask yourself ‘Can I handle those higher costs? Can I live with the risks?’ You will need a business plan. Don’t just say ‘ah sure’ and follow the others.”