It’s a dangerous world out there, you need a farm plan for finance
And when they finally get away, they will look for a restful break.
For example, a driving holiday in the Middle East would not be a good choice.
So Moira Creedon captured the attention of farmers at Tuesday’s National Dairy Conference in Kilkenny, when she told them that running a farm in the 21st century can be like driving a car from Cairo to Tehran.
“Don’t end up looking for an open petrol station late at night with the red light flashing,” warned the financial consultant, owner of Artemis Consulting Ltd.
That would be like a farmer running into a cash flow problem, and seeking bank funding for the farming business at the last moment.
Instead, the farmer must plan well ahead, and secure the best lending deal.
Ms Creedon said you wouldn’t do a Middle Eastern road trip without at least a map.
The point she was driving home was that a clear financial target and a plan to reach that target is the equivalent of a Satnav for a driving holiday in unfamiliar surroundings which scans the road options and advises on the best route.
The Satnav monitors where you are and guides you to stay on track; a farm plan must set up mechanisms to monitor whether or not you are delivering on your plan, and make proactive decisions to correct slippage and stay on track.
The Satnav scans ahead for traffic jams, speed cameras and roadworks.
The farmer with a plan monitors the risks in his plan, and knows when to change direction.
“The farm plan is a tool, but never set in stone. If things change, you need to stay agile and reset your plan,” farmers were told.
There are big investments and big potential earnings in dairy farming, but milk producers face increasing challenges, not just on the farm, but from far away in the form of international commodity price and foreign exchange risks, due to increasing global volatility.
So risk management is necessary, making sure that debts are under control, the equivalent of the driver’s spare wheel and a blanket.
The driver watches the rev counter to monitor fuel usage: the farmer needs his own rev counter in order to make good commercial decisions to improve efficiency and deliver real financial uplift.
“You would not head on a journey to a new place without carefully equipping the car”, was Moira Creedon’s message to dairy farmers who know only too well the hazards ahead in a farming year, having endured an estimated milk price fall of 24% this year, compared to 2014.
Having got farmers’ attention, she held it by referring to the fear that has been dawning this year for milk producers, that they are becoming like our pig farmers, always exposed to the fluctuations of the open market for pigmeat.
That has not been a very happy story for our pig farmers in recent years.
But Moira Creedon said dairy farmers can learn a good few lessons from them, such as engaging with bank personnel on an on-going basis, developing a reserve fund when profit margins are good, to ease the pressure in difficult times; monitoring performance and production costs on a three month basis; and measuring performance.
Having worked with corporate and public sector clients worldwide helping decision makers at strategic level to understand finance and improve their ability to formulate and implement strategy, Ms Creedon brought a fresh perspective to farm advice at the Teagasc event.
Her take-home message to dairy farmers, and Middle Eastern drivers: take care, it’s a dangerous world out there.
