Kieran Coughlan: Cashflow pinch is on its way

With ground conditions currently saturated, the chances of getting cows out to grass early in lactation remain slim, writes dairy farmer and rural tax specialist Kieran Coughlan

On-farm, care should be taken not to cut back on essential inputs in ways that undermine underlying profitability.

Farmers have not yet felt the full effects of tightening milk prices, as December milk cheques and Department of Agriculture payments received at the back end of the year are still buffering cash reserves going into 2026. For most dairy farmers, January milk supplies are minimal or non-existent, with income not resuming until the March milk cheque.

Many farmers may also opt to put milk into calves this spring, as there is likely to be a better return from converting milk into beef rather than selling calves at just two weeks of age. Where space and labour allow, at a cost of €3/day for milk, straw and concentrates, the uplift in calf value from two weeks to seven weeks can potentially add €250/calf in margin, which represents a meaningful income boost for the average herd.

However, delaying calf sales can compound cashflow pressure, as it postpones income while adding costs into the system. For farmers anticipating a spring cashflow shortfall, early preparation is essential. A certain level of liquidity is needed to meet day-to-day non-credit spending, such as direct debits for electricity, phone bills and household running costs.

Where larger direct debits are due, including loan or hire purchase repayments, it may be possible to restructure repayments. Care is needed, however, to ensure that any restructuring is not regarded as a default and does not impact credit ratings.

Another significant cost at this time of year is fertiliser, as the spring growing season approaches. Some co-ops and merchants are offering credit facilities that spread repayments over three or four months from April onwards, helping to preserve cash flow during the critical months of February and March

On-farm, care should be taken not to cut back on essential inputs in ways that undermine underlying profitability. While there may be scope to reduce discretionary expenditure, this should be done strategically. Options include delaying reseeding, postponing land drainage works, or deferring hedge cutting for a year.

Where soil fertility levels are high and well documented, there may be scope to run tight on P and K inputs and focus fertiliser spend on nitrogen only. This approach carries a health warning and should only be considered where soil fertility status is known and based on recent analysis.

Soil sampling

Given the higher-than-average rainfall this winter and limited slurry spreading to date, now is an ideal time to carry out soil sampling. Sampling 100 acres in eight-acre plots typically costs less than the price of one tonne of fertiliser, while the information gathered can guide nutrient decisions for the next four or five years.

With ground conditions currently saturated, the chances of getting cows out to grass early in lactation remain slim. 

Nonetheless, conditions will improve, and farmers are advised to have fertiliser in stock and ready to spread once ground and growth conditions allow. Early, fertilised grass delivers higher nutritional value and can positively influence milk supply for the remainder of the lactation.

Similarly, cutting back on feed quality or quantity during the first three months of lactation is a risky strategy. Metabolic issues, lameness, mastitis and fertility problems arising at this stage can have a lasting negative impact, not only on this year’s milking season but also into the following year.

If cashflow pressure is such that critical inputs cannot be funded from cash reserves or existing credit arrangements, action is needed now. Farmers should engage early with their co-op manager, sales representative or accountant to explore extended credit options or structured repayment plans aligned with the farm’s capacity.

Farm advisors and accountants can also help identify ways to free up cashflow, including the sale of under-utilised machinery or surplus stock. Finally, completing 2025 accounts early is advisable, as these may be required by banks or co-ops when assessing requests for extended or restructured credit. Early preparation will also highlight any further cashflow pressure ahead of the income tax deadline.

• Kieran Coughlan is a specialist in farm tax advice and is Principal at Coughlan Accounting & Taxation Services Limited. Kieran is a Chartered Tax Adviser (CTA) and Fellow of ACCA.