Tips for dairy farmers in times of crisis: 'Stay positive'

Dairy prices are coming under increasing pressure and the corona crisis is causing increasing uncertainty. After all, export barriers and a drop in demand are the order of the day and are likely to continue. It is therefore in line with the expectation that the milk price will fall sharply. The decrease has already started, given the fact that Friesland Campina, for example, has already paid the milk money twice has adjusted.

Despite the fact that many dairy farmers do not have a direct grip on the milk price, they can still prepare themselves in some way for the coming period. Four tips from three sector specialists. 

1. Make a liquidity plan
As a dairy farmer, it is important to have good insight into the cash flows within the company. "Good liquidity planning helps with this," says Jaap Gielen, a dairy farming specialist at Countus. He says it is important to calculate in advance as much as possible. "This way you can get a good picture of what the expected income and expenses will be in the coming period."

Clemens Van der Aa, sector manager dairy farming at Rabobank, also says that it is important to respond in good time to any expected shortages. "If you are already short in liquidity, it is likely that this period will be skimping on invoices, which is not conducive. So the advice is to visualize in time what the liquidity flow at the company looks like."

2. Look at (alternative) income and expenses
In order to maintain the cash flow as much as possible, entrepreneurs can look at alternative income. For example through alternative sales. Pierre Berntsen, director Agricultural companies at ABN Amro, gives a tip to look at the possibilities of selling through the retail channel or your own (web) shop. Selling machines and materials that are no longer needed are also options, according to Bertsen, to maintain the cash flow. You can also consult with debtors to speed up payment. 

With regard to expenses, it is important to consider which expenses are needed immediately and which expenses can wait. Unnecessary expenses or investments can be postponed. Unnecessary stockpiling is also discouraged by Berntsen. "Don't stock up on feed or raw materials unnecessarily. The price may be favorable, but it does take a bite out of the cash flow," said Berntsen.

3. Consultation with the bank
A number of banks are taking measures to help entrepreneurs in the coming period. This is to make financial room possible. For example, ABN Amro will suspend repayments and interest payments for the next 6 months. The bank also uses a scenario with 3 months of corona impact (up to and including June) for applying for emergency credit, followed by 3 months of recovery to a normal situation.

Rabobank advises to provide a good picture of the liquidity flow and to make an estimate of the milk price yourself. If the liquidity margin/buffer is currently less than 5 cents per kilo of milk, it is wise to request a postponement of repayments for 6 months in good time. For healthy companies up to 3 million financing, this application can be made online. Entrepreneurs who have higher financing can contact their account manager for this. "In this way we try to help dairy farming through this special time as best as possible," says Van der Aa.

4. Stay positive
Finally, it is very important to stay positive. The corona crisis is putting a lot of pressure on the shoulders of dairy farmers, but Van der Aa thinks that 'in-core healthy companies' can absorb this. "Past price declines have shown that the sector's resilience is high. The sector's flexibility and resilience will once again be decisive to get through this special time. We are confident that the sector will also endure well in the coming period Van der Aa said.

Bernts emphasizes that each other's help is needed to get through the crisis. Help each other as much as possible is his motto. The agricultural sector is crucial. "My expectation is, therefore, that after this crisis we will look at the world and our food from a different perspective."

Co-author: Jorine Cosse