Farmers seeking finance told to outline a realistic business plan

Teagasc has warned farmers seeking banking finance that their business plans need to outline a realistic strategy covering several years.

Representatives of three banks attending Teagasc’s ‘Financial Planning for Expansion’ seminar in Mullingar, Co Westmeath, highlighted the scarcity of well-thought-out financial plans presented to them. Dairy farmer applications for banking finance have soared in the build-up to next year’s abolition of EU restrictions on milk output.

The banks also emphasised the disconnect between preparing such plans to “get the funding proposal across the line” and their use by farmers as a tool to monitor their financial performance in the subsequent years.

“There has to be sound financial reasons for expansion,” Donie Cashman, a dairy farmer and former IFA president and chairman of IFAC, told the seminar.

“My take-home message is to undertake proper financial planning, pay close attention to management accounts, follow good farm practice, and link with your neighbours and with discussion groups to get good advice.”

Mr Cashman set his views in the context of Ireland’s last previous dairy expansion phase, before the introduction of milk quotas in 1984. He urged farmers and their advisers to anticipate shocks to the system, adding that it is important to protect yourself in your budgets and plans so as to better withstand any shocks that do occur.

Kevin Connolly, Teagasc’s financial management specialist, highlighted the range of Teagasc tools available to help farmers on a daily, weekly, seasonal, and annual basis. For example, the ‘My Farm, My Plan’ strategic planning workbook can help farms to develop a simple farm development plan and can feed into a multi-year financial plan.

Laurence Shalloo, a dairy systems economics researcher at Teagasc, said: “Large numbers of dairy farmers are planning to expand but relatively few have completed detailed business plans. The dairy expansion train has already left the station — as evidenced by the increase in dairy cow and replacement heifer numbers over the last three years.

“But how many of those farmers increasing dairy stock numbers have completed a business plan before they embarked on this level of expansion.”