Agricultural bank Oxbury has warned that dairy units, with higher yielding and housed herds are most likely to feel the pinch and has encouraged them to stay abreast of impending cash flow challenges.
“Although commodity prices slumped in spring 2021 due to the Covid outbreak, they have since rebounded sharply,” explained Oxbury co-founder, Nick Evans. “And with adverse global weather, feed prices have done the same.”
Last month’s Kingshay’s annual Dairy Costings report revealed that feed wheat prices jumped by £53/t in the year to February, to £203/t, with soyameal up by £105/t to £410/t.
Mr Evans commented: “Although they have since eased back, given the impact of Covid and Brexit on global trade, as well as an uncertain climate, that volatility is likely to remain a feature this year.”
The Kingshay report showed that dairy herds produced record high yields and milk solids in 2020/21, averaging 8,512 litres/cow and 638kg/cow, respectively.
“But with higher input costs, the average margin over purchased feed dropped from 20.44p/litre (£1,720/cow) to 20.16p/litre (£1,716/cow), year-on-year,” Mr Evan continued.
Although there were some really encouraging trends in the report, from improved herd health to a narrowing of the gap between the top and bottom quartile of producers, it’s important that producers don’t take their eye off the ball if faced with higher feed costs later this year, warned Mr Evans.
“Whether you’re investing in grassland management to maximise milk from forage, or fixing forward feed prices to give security over the winter, it’s vital to stay abreast of impending cash flow challenges. Don’t just wait and hope for the best as cutting back at the last minute could adversely affect cow health and productivity.”
Oxbury recently launched a unique flexible credit facility for dairy producers, offering them the ability to borrow up to 70% of their average quarterly milk payments per year to cope with times of tight cash flow. Operating in a similar way to an overdraft, but easier to set up and on more competitive terms, Flexi-Credit Milk Cheque enables producers to pay in or withdraw money when needed, with a minimum repayment of 5% per month plus interest.
“As the UK’s only 100% agricultural bank, with most staff having farming backgrounds, we are genuinely passionate about and supportive of British farming,” concluded Mr Evans. “Everything we do is designed to make farmers’ lives easier and their businesses stronger, and we’d encourage any dairy producers who anticipate cash flow issues in the year ahead to get in touch.”