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Get to grips with budget basics


Having a good paddock design and layout will help you get the most from your grass

Having a good paddock design and layout will help you get the most from your grass

Having a good paddock design and layout will help you get the most from your grass

There has never been a more important January to prepare for the year ahead with a grass and a cash-flow budget.

2015 will be challenging with reductions in milk price, superlevy bills and increasing stock numbers.

Many farmers dread the thought of preparing a cash-flow budget. But the basics are simple.

Estimate the income coming in for the year versus the costs going out.

This should be reviewed on a monthly basis to give you the option to adjust the budget for any unforeseen circumstances.

Start by estimating your income for the year.

Include off-farm income, projected milk sales and possible stock sales. Identify your costs, including drawings, taxation, debt repayment and any new investments which have been planned.

Next, examine your farm production costs and challenge yourself to see where you can reduce these. This can be difficult, but remember that every 1c per litre reduction for a farmer supplying 300,000 litres is worth €3,000.

Those farmers I see with consistently low costs question spending across every category, not just in one area.

If after setting out your budget there is a deficit, your next move is to set out a plan to deal with it. Are there surplus or unproductive stock which can be sold?

It is more important than ever to match your farm's grass growing capacity with your stocking rate.

Prioritise what capital spending needs to take place or what can be put off for another year. Let phosphorus, potash and lime be the last things you cut.

Armed with a cash-flow plan and a sound five-year business plan, talk to your bank manager about the options available to you.

But be careful not to re-structure debt which has a low interest rate onto a higher rate unless absolutely necessary.

In a budget it is best to underestimate the income and overestimate the costs. Don't sweat the small stuff - put down as accurate a figure as you can and move on.

Talk to your adviser if you need help in getting started. Remember that no single action will work for every farmer. Instead, it will be a combination of actions suitable for your farm.

Grass budgeting

Next on the agenda is to commit to grass budgeting for the coming year.

Additional days grazing in the springtime are essential if the amount of grass utilised is to be increased. Early grazing also improves sward quality by cleaning off old dead material from swards carried over the winter and stimulating fresh re-growth of the plant.

Spring rotation plan

The spring rotation plan allows you to ration out the grass available from turnout after calving until the end of the first rotation.

This gives you the confidence that you won't run out of grass before the end of the first rotation and into the second rotation. It also ensures that cow intakes are increasing coming up to the breeding season.

The plan can be done on a daily or weekly basis.

But there are three main targets to remember:

• First third of farm grazed by March 1;

• Second third grazed by March 17;

• First rotation completed by April 5.

Get out as early as possible in February to ensure that paddocks have enough time to re-grow for the second rotation, but adjust the dates to best suit your farm. For example, delay by 7- 10 days on wet or more northerly farms.

The plan will also have to be reviewed and adjusted as the spring progresses.

Ballyhaise's Donal Patten pointed out that grass is a perishable feed at the Grassland conference.

So after going to the cost of growing it, it's vital that it is used at the most cost effective times. Grass budgeting allows you to make these decisions with confidence.

Nora O'Donovan is a Kerry-based dairy advisor with Teagasc


Indo Farming