Dairy farmers must be frugal, but not with feed

Alfa Accountants and Advisers says that dairy farmers would do well to keep a close eye on costs, but at the same time should not want to skimp on feed. Due to the rapidly falling milk price, financial risks are lurking. All the more so because dairy farmers can expect a hefty tax assessment after a good return in 2022.

A liquidity budget on dairy farms is more important than ever this year, says Alfa advisor Jan van der Vegt. "Many companies may have a liquidity buffer. But despite that, the credo for 2023 remains 'focus on variable costs', to keep the highest possible amount for rent, depreciation and interest." All the more so because there is also a high tax bill hanging over the companies, due to the rapidly increased milk price last year.

In addition, according to the consultant, the high feed costs also weigh heavily, which have fallen much less sharply than the milk revenues. In addition, interest rates have risen, which is detrimental to some entrepreneurs. After good results in 2022, according to the accounting firm, a new reality is dawning.

Don't focus on critical milk yield
"Entrepreneurs in dairy farming would do well to focus on the critical feed balance, a new indicator that Alfa introduced last year," says Van der Ven. The number represents the total fixed expenditure (excluding the purchase of feed) minus the other revenues (excluding milk).

By only focusing on the critical milk yield, the focus in business operations can become too much on keeping the wallet closed, is the reasoning of Alfa. The accountant knows from his own figures that companies with the lowest feed costs do not always perform the best from a financial point of view.

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.