PCF Our mission is to help you achieve a quality lifestyle combined with a highly profitable business

Transcription

1 POSITIVE FARMERS CONFERENCE CLONMEL, CORK, IRELAND 15TH AND 16 TH JANUARY 2014 DairyCo was represented by Richard Davies and Becky Miles at this 2 day Conference, preceded for UK farmers by a day visit to Teagasc, Moorepark Research site and the new Greenfield dairy farm nearby. 130 farmers travelled from the UK to attend with a predominantly young age profile. Other attendees were mainly from Ireland, but also from USA and other European countries bringing total attendance to approx This year s conference was focused on profitable, sustainable expansion at low risk. Resilient was the word by several speakers used to capture the theme. The PFC concentrated on the management and technical factors that a farmer needs to get right and the pitfalls to be avoided. As well as covering on-farm technical aspects and current research the spotlight was turned on to management of people, money, risk and project management. PCF Our mission is to help you achieve a quality lifestyle combined with a highly profitable business Speaker topics included milk price volatility, successful succession and business partnerships, the rewards of financial discipline, on-off grazing, drainage, Managing the Dutch Co-operatives merger, sexed semen research, key factors for successful dairy expansion, people management and project management. Synopsis of speeches available.. Day 1 Mike Murphy Milk Price Outlook An Unforeseen Risk The huge increases in supplies of natural gas and oil in USA and Canada will probably pose a strong risk to future Irish milk price by enabling the USA and Canada to be more competitive and produce milk at lower prices. Beware farmers who borrow against the current milk price will be taking a huge risk, be conservative on milk price forecasts. Sean Cummings Operating a Milk Production Partnership with my father A parent/son/daughter partnership brings together different beliefs, attitudes, goals, expectations and at different stages of each individuals farming career. Understanding each other s perspective and motivation can help common goals being established. Sean and his father set up their partnership 3 years ago and have concluded that the lessons learnt are: Don t sweat the small stuff identify the essential changes, but accept you won t get everything your own way; you will have to concede on other issues. You could be wrong be careful on what you dig in your heels for. Research, research, research then communicate Communication propose your idea, ask for advice and LISTEN to the response. This shows you are not demanding change BUT seeking advice. Then you will learn what the barriers are and you can address these to allow change to take place. Seeing is believing. Go and see the proposed change on another farm the disagreeing partner can then voice their concerns to someone who has gone and done it.

2 Get an independent view if no common ground can be found, use an outsider, disc group or adviser to remove the emotion and reinforce the facts. Trust is earned a young farmer must earn trust, and a safe way is make changes that positively benefit the other partner s working day. Easy wins early on make future changes easier to negotiate. Consensus is key it may take time but agreement will always be achieved. It is better to change 5% with consensus than 100% change with none. Both father and son agree that working together is the most challenging and most rewarding part of the business. David Jennings Farming in Partnership After working for a local farmer on placement while studying agriculture David travelled and worked on farms in NZ. On his return he worked as farm manager for his placement farm but after further study realised that he and his wife wanted to farm in their own right. David went into partnership with the farmer he was managing for and leased a farm from his wife s parents. Over the last 5 years he and his wife have realised Return on Equity of 20.6% and Return on Capital of 16.2%. When the idea was first discussed a consultant was used to bring everything together a plan was drawn us to what assets were going to be put into the partnership and how profits would be divided to each partner and the role of each person involved. David s tips for others are: focus on right people to drive the business, build solid relationship before signing partnership agreement, have an exit plan just in case, refer to our cows NOT my cows, have a mix of talents within the partnership, have the right professionals at the start and keep all partners updated on a regular basis. Michael Crowley The Practical Information we use to make More Effective Decisions Left school as soon as possible and worked in building trade in London. Returned to Ireland with his wife to take over family farm of 22ha and 30 cows. Knew very little about farming, milked cows and turned them out all over farm. 4 years later they took on 3 other small neighbouring farms without doing any costings or budgets. At the end of the first year they had no money the bank offered an overdraft and they took it, as well as loans for a digger and cattle housing. The next Christmas they were in debt with no obvious solution. In the new year they joined a discussion group there was talk of profit monitors, weighing grass and comparing figures. All completely alien but they put some figures together which started to show were they could improve and save. A meeting at the bank led to one consolidated loan over 15 years. They compacted (blocked) the calving sold cows that didn t fit in and got cows out to grass much earlier. An A4 book to record money in down one side and money out on the opposite side was the crucial tool it told then what bills they could pay and what had to carry over to the next month. Two other essentials tools were a diary to record everything that happened on the farm AND bull dog clips for holding all invoices and dockets together so you know what bills are coming in.

3 Now the overdraft is cleared, they have 120 cows, they are financially stable and know what they need to do to keep the business on track keep fertile cows, compact calving and good grass measuring system. Major additional lesson is DON T do bookwork at night and go to bed on an argument! They now belong to two discussion groups, enjoy farming and the whole family is involved they look forward to the future! Leonie Guiney The Rewards of Financial Discipline Family time is priceless and the creation of opportunities for young people. Leonie and her husband, farm in NZ and started with very little. The farm they bought used to support 7 people now it supports 8 couples and 17 children and 9 single staff. The 9M turnover is split in half, half on expenses back through the community the other half is profit. Financial discipline is what delivers success. Every opportunity is assesses on whether it will make an acceptable return so you need to know: How to estimate the right price Refuse to over capitalise And know you have the farm system and management to deliver CONSISTANT profit. To embrace financial discipline you must see the opportunities that being a sound financial manager creates. Have the resources that make it simple to do regularly (good cash flow programmes) and finally, stop doing what you don t need to do, DO what needs to be done that relate to you achieving your goal. With all this in place YOU will be in control and able to seize opportunities as they arise. Their system is set up so that we do not chase extra milk with supplementary feed, our cost of production is 40% less than the average Canterbury dairy farm the profit was 50%, compared to the average of 30% of other farms. This profit level drives their staff and encourage them to become sharemilkers with them. They are rewarded for saying No to extra feed it means YES, they can offer a % to their managers and make them sharemilkers and YES their simple system to allowed them to live in France for a year and leave the team to manage the farm. Financial discipline has given them options to contribute to the industry and to continue investing. Leonie then got the whole audience to work out with her how to calculate Return on Capital (ROC) Key info required = Profit = e.g Inventory change = +11,140

4 Depreciation = 49,794 Interest = 23,000 Equity = 420,000 Debt = 780,000 Capital employed = 1,200,000 (equity + debt) (160, , ,396 49,794) x 100 1,200,000 = 62,336 = 5.2% ROC! 1,200,000 Return on equity (ROE) = (62,156 23,000) x 100 = 9.35% = ROE 420,000 What bits do you have control of that wold improve the margin or make leasing a viable option? Minimising the bottom line, maximising the top line delivers real returns and gives you options when you keep repeating the behaviour. Emer Kennedy The use of on/off grazing to reduce poaching damage and increase the number of grazing days achieved. Emer gave a resume of the research carried out at Teagasc on planned on/off grazing systems and the potential benefits: Spring poaching results in a greater reduction in grass DM production than autumn poaching. 50% reduction in grass DM production if paddocks are damaged in spring and autumn on heavier soils On/off grazing is a management tool that can be implemented on all soil types 2 times 3hr grazing periods (after milking) is the optimum on/off grazing time period to allocate spring calved cows in early lactation Grass silage supplementation can be eliminated from the diet with the use off on/off grazing Cows given access to pasture in two distinct grazing periods can achieve 95% of the intake achieved by cows given access for 22 hrs. Pat Tuohy Land Drainage Pat gave an insight to the recently compiled Teagasc manual on drainage and soil management. The manual covers, causes of poor drainage, objectives of land drainage, drainage investigations, types of drainage system, outfall maintenance and approximate costs.

5 Richard Davies has a copy if you want more information! Leonie and Keiran Guiney THE BIG WHY Building a 3000 cow dairy business and living the life we cherish Leonie had spoken earlier on financial discipline the couple spoke about how they had spent weekend back in 2002 making their own Strategic Plan and then FOLLOWED IT THROUGH. There were 6 strategic focus areas: Wealth creation Technical farming Staff/employee relationships Friends, positive people and networking Family health and lifestyle and Intellectual stimulation Sharemilking has been the vehicle for them to land ownership though not a specific original goal it presented itself as an investment that fitted their criteria. The first opportunity arose where they invested in a large sharemilking job they knew they had to repay the loan over 5 years and MUST return 180,000 in the first year. They actually returned 300,000 more than 100% on equity. Each time they look at an opportunity they DO THE MATH. If it won t make the turn they say NO. Leonie says that they are only regurgitating the principles of investment and strategic thinking they have learnt in Ireland. Many farmers do the grass to profit better than many NZ farmers NZ farmers have become distracted, which is where we were 20 years ago. You must decide what you want and why, write it down. Underscore with your key values put some disciplined investment principles in place. Then stop waiting for the perfect conditions and just do it. Note of caution no mention of capital repayments so the farms would have to be sold to pay off bank or handed to children take forward and repay capital! DAY 2 Piet Boer Friesland/Campina Learning from Dutch Excellence Piet explained how 2 coops that had no intention of amalgamating did just that. Amalgamation depends on what he strategic rational aim is. If no there is no profit in it don t do it. If there is profit in amalgamating then it depends on the people if people won t change you have to explain that change is happening and they have to engage or say goodbye! They said goodbye to some high level execs during the process. Their merger was 90% cost saving exercise. He when on to explain that while there is potential for exporting dairy product to China the Chinese Gov. will restrict WHOI can export to them and it will probably be left to 2 big players. Looking at other markets you should look to where population is increasing i.e. birth rate. Nigeria has a rapidly increasing birth rate which means the demand for milk products is rising. So watch growth categories and respond to change.

6 When marketing milk products size matters to retain market share. Nestle, a Swiss company is market leader but Switzerland is not the leading milk producer. What is crucial is that the public trust the product from grass to glass you need to employ TOP marketers. Proctor and Gamble employ the top people it is essential for growth and value creation. People FreislandCampina train their board members from grass roots level. The farmers are all members of the coop, Holland is divided into 21 districts and the members have their own council to which they elect a Chairman and other council board staff. These Council staff serve and can progress to the Board. In addition to this they have a Youth Council where young farmers can be recruited, introduced to the company structure, developed and then exit hopefully to join the Council and possibly the Board. It is a large investment for the company but pays back in loyalty and ensures they have driven trained professional farmers to select from for their Board. It ensures diversity within the team. Very importantly he stressed that they use exit interviews to help review the Board and Council any issues can be nipped in the bud. For the future he said that Ireland was well placed to develop distinguished products and maximise use of grass to glass potential. Stephen Butler Is there a role for sexed semen in seasonal calving systems? This project is on-going but the summary is: Sexed semen is normally sorted to 90% purity (i.e. 90% heifers, 10% bulls) Conception rates achieved with sexed semen are reduced compared with conventional semen Early results from a field trial in spring 2013 indicate significant improvements in fertility of sexed semen compared with previous data (Editor s note of caution there were issues with 2 bulls used in trial!) Conception rates improved with increased duration since calving (cows) and greater BCS (cows and heifers) Modelling work identified faster, more profitable expansion with sexed semen Other benefits of sexed semen use include increasing the beef output from the dairy herd, improved biosecurity and reduced calving difficulty Best practice guidelines on the use of sexed semen to be published in spring 2014 Kevin Twomey My experience of expansion Success is different for everyone know what it is for you. What Kevin learnt along the way (it didn t all go according to plan) Set yourself achievable goals in a timely manner Is everyone on board Adapt to change Farm principles cost control, grass measuring, fertile cows, people in a team Repeat performance simple system, adaptable practices, communication, delegation

7 Conclusions success is relevant to everyone, system control, people skills enjoy the journey AND the rewards ED Dale Brief overview of our experience of people Management As a family the Dales have gone from managing 220 cows in 1 herd with 1 employee to managing 2000 cows in 6 herds over a 45 mile radius with 14 full time staff and 15 part time. 2 operations are on a profit share or equity share arrangement. The key is: Start with the right people Clarity let them know what is expected of them Delegate give them responsibility Communication feedback goes 2 ways! YOU SET THE CULTURE OF YOUR BUSINESS SO IN THE END YOU WILL EMPLOY THE PEOLE YOU DESERVE Brendan Horan Teagasc CONFERENCE SUMMARY 5 main considerations reflected over last 2 days: 1. The importance of written shared goals for next 10 years 2. The importance of the role of the farmer as a relationship manager within an expanding business 3. The fundamental importance of a simple profitable resilient and repeatable farming system as the basis for future expansion 4. We must develop simplified financial management and farm investment appraisal methods that allow us to investigate dairy farm expansion opportunities that provide a reasonable return on our efforts and resources 5. Remember we are producing food within a volatile production environment and must not become complacent when market prices are high.