Dairy Business Farm Planning
Stage 3.4: stage3_4
With opportunity comes risk. In general, the bigger the opportunity, the bigger the risk. Risks are personal to the individual farmer – what is risky for one farmer is not for another farmer. Planning helps to manage risk so that it is set at a reasonable level. Farmers need to identify the risks they are carrying.
You have to consider the impact of volatility in milk and input prices over the planning period. What impact will a 3 cent per litre drop in milk price have on your bottom line?
Where are the other risks? These could include:
- Production Risk:
- Poor weather affecting production
- Animal disease
- Reduced milk yield per cow while scaling up
- Market Risk:
- Reduced milk prices (price volatility)
- Production cost increases
- Human Risk:
- Owner manager health issues / stress
- Employee issues
- Supplier / contractor issues
- Complicated system of production
- Financial Risk:
- Interest rate increases
- Cash flow shortage (overdraft or merchant credit restricted)
- Failure to control investment costs
- Inefficient / unprofitable production system
Managing risk involves controlling exposure to the risk or controlling the impact of the risk. Examples of risk management strategies include: building key reserves of feed and cash or vaccinating animals against the risk of disease.
Improving efficiency is a pretty much riskless strategy. With a sound efficiency platform in place, you can set yourself up for the future. Simply put, efficiency first followed by expansion.