Profit, Not Payouts, is Vital Focus

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Complaining as to why the dairy payout should be $4.25 or $4.50, or what will happen to the cull cow schedule the dollar changes, is sapping farmers energy according to farm business specialist Peter Floyd. The preoccupation with the exchange rate, the payout and schedules is definitely not the best use of time and energy, says Floyd. If farmers follow other successful businesses and focus on profit rather than price or production, their own businesses are far more likely to thrive.

Floyd, developer of The eCOGENT.biz Process for farm businesses, now has considerable evidence from his studies throughout New Zealand that a profit focus allows farmers to think outside the square and find new opportunities for bolstering the bottom line.

Farmers forget that their business is converting grass into dollars of profit. There are many opportunities to do this better because most farmers have little idea how much profit they can make per day from each kilo of dry matter, says Floyd.

Dairy farmers have a victim mindset that says the only thing they can do to stay in business in the face of a falling payout is increase milk production. This is absolute nonsense.

Modern business analysis techniques will almost certainly throw up other more profitable strategies, which could include not applying nitrogen, reducing dependence on supplementary feeds, reducing herd size, and soon. There are no hard and fast rules because the best options vary from farm to farm.

Floyd says that if you ask dairy farmers how much profit they make each day, they just stare blankly. He believes it makes sound business sense to find out which type of supplement if any make the most profit per day, and concentrate on those strategies. We have business tools available now to determine best-profit strategies for any farm, and the farmers using them have an enhanced ability to not only maintain but improve profit levels, says Floyd.

Some time ago ANZ Bank Chief Economist David Drage agreed that in a deregulated environment farmers need to distinguish productivity from merely maximising production. We do not have the luxury afforded by the distorted farm policies of some of our major competitors. It is therefore critical that farm businesses keep their eye on the ball. Unfortunately this thinking has not permeated into the dairy industry at all as we read about production results which have only a slight bearing on profit.

And so the opportunity to use the very best business tools as available in DairyPoint.biznow allows sustainable profits to be achieved never thought possible in the past. And yes, achievable by not having to purchase a whole raft of capital items, but by investing in some business tools that stimulate learning and alow considerable profit gains to be achieved. Therefore its about making sure that you elect the very best people to the boards of directors of your stakeholder companies. Then you get on with the business of focusing on profit for the benefit of you and your family.

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