Where dairy farm cash flows

Where Dairy Farm Cash Flows
Business challenges

5 July 2017, by Ian Bailey

Whatever system is being operated, whether extensive, intensive, Channel Island, organic, the points below are relevant to your business and can help maintain competitiveness in challenging times


1  Have you the mind-set to take control of your own destiny? Or do you feel uncertain and a victim of circumstance?

2  Is farming right for you and your family? What are your plans for inheritance? Are you doing the right thing for your non-farming family members and can the business support all these objectives?

3  What will you need to invest in your facilities in the next 10 years? How will you fund it and justify it?

4  Do you know your cost of production and the milk price you need to make a good margin? Are you benchmarking your performance and constantly trying to identify ways to incrementally improve performance?

5  Can you improve your return through improved marketing and producing what your customers really want? Are there niche opportunities even if they start small?

6  Are you maximising your skills and paying yourself a competitive rate? Could you earn more off the farm part-time or full-time?

Would you be better off paying someone else and trying to add value to other parts of the business?

7  What are the threats to your business – might there be a day when you will find yourself without a viable market for all your current produce – how robust is demand?

8  Do you have the right skills for the technologically and market driven global agriculture industry of the future?


For your business

Glossary Farm Business Income (FBI) is the Total Farm Gross Margin less the sum of the Fixed Costs incurred, before any charges for unpaid labour or notional rent on owner occupied land. FBI for sole traders and partnerships represents the financial return to all unpaid labour (farmers and spouses, non-principal partners and directors and their spouses and family workers) and on all their capital invested in the farm business, including land and buildings. For corporate businesses it represents the financial return on the shareholders capital invested in the farm business. Although FBI is equivalent to financial Net Profit, in practice they are likely to differ because Net Profit is derived from financial accounting principles whereas FBI is derived from management accounting principles. For example in financial accounting output stocks are usually valued at cost of production, whereas in management accounting they are usually valued at market price. In financial accounting depreciation is usually calculated at historic cost whereas in management accounting it is often calculated at replacement cost.


Key Contacts

Ian Bailey

Ian Bailey

Rural Research

Savills Margaret Street

+44 (0) 207 299 3099


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