Wednesday, 22 July 2020 09:27

Managing debt to beat Covid storm

Written by  Phil Fleming, FarmWise consultant in Taranaki
Phil Fleming. Phil Fleming.

Phil Fleming, FarmWise consultant in Taranaki, on steps farmers can take to manage debt and come out on top.

Farmers have been positioned as saviours for our post-Covid recovery, but like many, a priority for them remains reducing debt, despite the Government taking measures to reignite the economy and preserve jobs.

It’s well-known we live in one of the best countries in the world – if not the best – for dairy farming, largely due to our climate, topography and soil types. However, large expansions and easy borrowings, based on capital gains, have in the past few years, led many farming enterprises to accumulate a large amounts of debt.

With the new season underway, dairy farmers should be reviewing their budgets and assessing debt levels.

But what else could farmers be doing to weather winter and the seasons ahead and come out on top?

Frailty of finance

Reduced land values in certain regions, coupled with banks financing less dairy expansion and requesting capital repayments, means many dairy farming operations must be more mindful of managing income and expenses. Consider where savings can be made and ensure you lock in profits, with considerations for payments and tax yet to be paid.

Solid payment

Fonterra has announced a wide opening milk price forecast range of $5.40 - $6.90/kgMS for the 2020/21 season. Thankfully, it is looking on the higher side. Taking into account, maintenance, debt repayment and capital development to meet regulatory requirements, the breakeven milk price for many dairy farms will sit at around $6.50 - 6.60/kgMS.

For farmers that are highly leveraged, a milk price as close as possible or above the $6.50 - $6.60 range (and certainly no less) will be needed to make any headway. By now farmers should have done the numbers on their anticipated payment range and updated their budgets to reflect the different scenarios. If not, get onto it. Look at your farm working expenses and know what your breakeven milk price is.

Continually improving

It’s going to be another busy and at times trying season, so get yourself match fit by reviewing last season’s financials and asking yourself, what went well and what could you have done better? Where is there room for improvement and where could efficiencies be made? And remember, small changes can make big differences to bank balances.

Shop around

Compare your operation with other farms of a similar size and system to gauge your strengths and challenges. Make use of the annual Dairy NZ economic survey or dairy base to compare costs.

Seek expert help

Farmers are usually Jacks and Jills of all trades, but it’s important to seek counsel from a trusted advisor, whether that be a professional farm management consultant, bank manager, accountant or lawyer, at different times during the year for impartial advice and a fresh perspective. Equally important, plan ahead and monitor your monthly cash flow budgets so you know your current business financials. Take advantage of financial & budgeting software such as Figured-Xero or Cashmanager Rural to help with this.

Now is the time to utilise available resources to ensure an even more resilient farming community as our country collectively pulls together to weather the post Covid storm. Reach out to your local Rural Support Trust (phone 0800 Rural Help).

• Phil Fleming is a FarmWise consultant in Taranaki

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Dutch robotic specialist Lely launched a new farm management application called Horizon at its recent Future Farm Days 2020.

Designed to connect data from a range of on-farm equipment and suppliers into one management system, it creates a real-time decision-support platform, to make the farmer’s life easier, the herd healthier and the farm more profitable, says Lely.

Developed over a 24-month period, with over 100 test farmers in seven countries, working with 75 engineers, designers, farm management advisors, veterinarians and AI specialists, the new application will eventually replace the current Lely T4C management system. It uses smart algorithms and the cloud to deliver data that is processed into actionable information that is always accessible on any device in a user-friendly way.

Lely claims the Horizon application unburdens farmers from routine decision making and helps them optimise their workloads, using integrated routines based on easily scheduled cow ‘touches’, create logical and more efficient workflows. It is also possible to assign a certain task to an employee and to schedule a time slot for the cow touch, rather than analysing different reports and filtering long lists.

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To ensure full support in the migration to Lely Horizon, existing Lely T4C customers will be personally informed by their Lely Center before the end of 2020.

The migration is planned in a phased approach, from country to country, over the year 2021.

Also launched at the event, Lely Exos is an autonomous concept for harvesting and feeding fresh grass to the herd.

The company suggests that feeding fresh grass makes better use of available roughage, suggesting “fresh” has between 10 and 20% more nutritional value than grass silage, as there are minimal losses typically seen during mowing, tedding, raking, harvesting and feeding.

Lely suggests that feeding fresh grass over an extended season reduces the amount of silage that has to be conserved, reduces the need for concentrates and bought-in feed and increase the margin made on each litre of milk produced.

Based around an all-electric vehicle that mows and feeds, Exos is light weight and uses soil friendly technology, that can be exploited throughout the growing season. Design to work 24/7 as feed requirements change, the system places no constraints on labour or time, while it is also designed to work in tandem with the Lely Vector automatic feeding systems.

In operation, Exos also collects field data as it goes about its job, giving framers live data on grass supply and lending itself to a further concept of delivering a targeted liquid fertiliser as it passes over a harvested area.

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