PROFITABILITY. We need, as dairyfarmers, to recognise PROFITABILITY is the essential first step to sustainability for the ENVIRONMENT, for the PEOPLE in our business and our business.
We need to recognise showing cows, registered cows, and high production cows, are not indicators of PROFIT.
A PROFITABLE business facilitates investment to grow and improve the business, to undertake sustainable ENVIRONMENTAL practices and develop and reward the PEOPLE who operate the business.
Dairyfarmers are business managers who care deeply for their ANIMALS their FARMS and their role in the COMMUNITY . We also need to care deeply for PROFITABILITY, as we need the financial capability to care for our farms, our people and our environment.
PROFITABILITY will improve in the industry if, culturally, it is a priority for the business. Improving knowledge and skills through discussion groups, courses, the use of respected independent consultants, benchmarking, a mentor who has demonstrated success will all contribute personal development and lead to improved PROFITABILITY.
If we can have more PROFITABLE dairyfarmers, we have a more capable, resilient and attractive industry. We are more likely to speak of dairyfarming positively, which in turn makes it a more attractive industry for young people to want to be part of, bringing enthusiasm and new ideas with them.
Now we have a VIBRANT industry young people want to be part of, that focuses first on PROFITABILITY because it recognises profit has to be planned for, that it doesn’t just happen, and profit is necessary to care for our FARMS, PEOPLE and ENVIRONMENT.
I think Skater intended to send the same message that James' comment does, and largely I agree.
However, I am reminded of the "lucky" effect on so many people's fortunes and prospects.....
Those that were born into well off families, those that were enabled financially by this stroke of good fortune, and also education-wise.
There is no doubt that many highly profitable farmers are there by sheer guts, determination and calculated risk, but do not dismiss the effect of incredible luck over a very long period of time. However, one thing is certain, they all focus intensely on profit, risk and return, and they ensure they are financial experts first and foremost, and their business and banking relationships are managed with utmost professionalism.
The struggling ones will be in that state for many reasons, but largely by having spent more than they've earnt, and probably over quite a period of years, but there are many there at this juncture who are just in the wrong place at the wrong time. If the rip off by shorting the milk payment promised by the NZ processor hit just after a serious expansion/intensification/ technology investments had been funded, but returns not fully realised, and if the reliance on irrigation water had left them super exposed to huge cost increases, same for bought in feed, (Tassie farmers with unmetered ground water are very fortunate indeed), plus if health or family concerns had taken a turn for the worse to add further weight...then it really sucks to be them.
If 70% of farmers in a given region cannot be profitable at $5 then one might conclude that that region is less suited to Dairy, and the market will bring about the change required. In some cases, processors might ramp up payments to make it more viable in those regions, especially where large investments in processing facilities have been made.....so the farmers in the areas where profit has been easier to achieve may face a drop in milk price in order to fund that......how would that go down I wonder?
And of course, we ought consider the effect on the viability of even the most profitable farmers if the bottom 30% were to cease production...….is that the answer to the supply / demand conundrum?
I agree. But we need to also understand that profitability doesn't just magically come from DA, proccessors or a higher farm gate milk price. Instead it comes from having a robust sustainable business that can withstand volatile milk prices (that we cannot control)... So instead of getting caught up on milk prices we should improve our business knowledge and capacity to generate profits in challenging conditions. We all need to understand that this may need some people to change systems, farming methods, cow type or location. Farmers or consumers shouldn't need to subsidize unviable dairy businesses.
It appears a smaller dairy industry may provide sustainable profits for farmers.
Is DA preparing for an industry 8billion litres and below ?.
Where will growth come from ?
Some regions will never recover.
Dairy conversions won’t happen while beef and lamb remain strong.
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