When cash is the biggest need

Like other costs, those for animal health have soared, vet Trevor Cook writes.

A challenging year continues as weather and prices keep going against plans and budgets. It is hard to change direction right now and all that can be done is to make the most of what we have.

A very common discussion topic is costs, rather than where to increase production. After such a year to date it is not the time to make changes, although for one of my clients the financial situation is forcing that. A big debt load and rising interest costs are pressuring the cash flow, hampered by widespread farm damage putting further pressure on that flow.

This must be a common situation for many eastern and northern farmers who are suffering almost in silence. Outside help can only be useful to a certain extent when cash is the biggest need.

A farmer recently complained that animal health costs had almost doubled this last financial year. It seemed he was targeting me as the cause even though his purchases had not come from me.

The discussion that ensued led to a review of animal health inputs. But first I had to convince him that product prices had increased significantly. Any imported product costs a lot more, and a big proportion of animal health products we use are from overseas. But as with everything we buy, all animal health products are costing more.

The farmer prompting this discussion did let on that dog expenses had skyrocketed. In fact they had doubled and were one-third of the total animal health costs.

In most accounts the dog expenses are a separate item, but not for this farm. A couple of major leg surgeries had contributed to the big increase. Taking dogs out of the total animal health spend lessened the size of the cost lift. But going over the rest of the spend there was very little to take out.

Vaccines in particular have increased in price. Most vaccine programmes cannot be dispensed with and I am always cautious about changing an established programme. Nevertheless there is room to move on some. It is dangerous to describe these because any change should be accompanied by management changes and usually more monitoring.

Anthelmintics are getting more and more expensive. This no doubt has some origin in increased production costs. But raw material costs are contributing to the increase and compliance costs are forever increasing. Setting up systems that allow much less drenching is surely the pathway to spending less. It can be done.

It is an interesting conflict when sales advice is contrary to what is best for the farming business. Fertiliser companies make profit by selling fertilisers. Yet all farmers are looking at ways to decrease their fertiliser spend.

So who is best to advise them on how to make that decrease? It’s the same with animal health products from any outlet. Selling more is never compatible with needing to spend less. But there is a lot of room to move when looking at the big variation in farm expenses per hectare across members of my discussion groups.

That in itself is not conclusive because an expense taken in isolation could lead to a higher income. Such as cropping. A KPI that can be misleading is farm expenses as a ratio of gross farm income. A very high gross farm income can bias that ratio.

The big cost discussed at almost all farm discussions is shearing. Of course it is that cost relative to the value of the wool. Unfortunately, as wool value has gone down the shearing costs have gone up.

United Kingdom farmers who have had very low wool prices longer than us treat shearing as a necessary cost of running sheep. I never hear the same disgruntlement about that cost relative to the wool value over there. When I get amongst the growing number of farmers getting into the no-wool sheep and hearing of the massive decrease in shearing it is a stark reminder of that cost.

For those farmers the savings go well beyond saving on shearing. The less dagging/crutching and less drenching is real. At a recent group day of these farmers, there was a vigorous discussion about what to do with the woolshed. The nine stands and huge wool floor were testament to a past glory age that was rapidly being left behind.

Beware to not let a cost-saving mentality sacrifice production. Earning must remain a key focus.