Analysis Countus Dairy Cattle Index
Expensive months are coming for dairy farmers
The Countus Dairy Cattle Index has been showing a stable picture for weeks now, which means that the return on dairy farms appears to be relatively stable. The traditionally more expensive months are now approaching, making it wise to have reliable liquidity planning, according to Countus.
The Dairy Cattle Index has remained virtually stable in March and now stands at 92,4 points, with 100 points being the 5-year average. The return of the dairy farmers is therefore slightly below the average of the previous 5 years. On the cost side, fertilizer sales prices have fallen, which is in line with the seasonal pattern on the fertilizer market. Also the compound feed prices showed mainly declines.
No higher return
Although some of the costs have decreased, the Index shows no decline. This is due to the fact that the raw material value of the milk has lost ground over March. The guaranteed price FrieslandCampina therefore fell by €0,50 to €36 per 100 kilos in April. The milk prices of various other dairies are mostly stable.
"In recent months we have seen that the milk price at most companies was sufficient to pay the costs, but no large buffers have been built up," reports Camiel Verhagen, advisor at Countus. "In addition, a lot of liquid assets were used last year to purchase phosphate rights." Based on the current quotations of the dairy products, there is no prospect of higher milk prices. The Index's forecast shows that returns will decline in the coming weeks.
Expensive months ahead
According to Verhagen, the coming months therefore require good liquidity planning. Traditionally, the spring months are 'expensive' months, mainly because of a peak in labor costs and costs for manure removal. A number of companies also have to take into account a tax assessment for 2018. "A monthly liquidity forecast for the rest of the year is a good tool to get a grip on money flows."
"When making the liquidity planning, it is also wise to map out the company-specific phosphate space", Verhagen reports. Liquidity planning (partly) determines the options for purchasing phosphate rights. "For example, the planning can indicate whether there is room to buy phosphate rights, or whether leasing is a better option."
Calculate investment
The adviser also knows from practice that the banks are still very reluctant to finance phosphate rights. "It is therefore likely that the dairy farmers will have to finance the rights with their own cash." Verhagen advises that it is wise to calculate the return on the investment carefully before purchasing.
Tim Roetman
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