CARA Wales

Many businesses pay from £700 upwards for their annual accounts to be completed. How many actually use the accounts to assess their position and profitability?

Accounts show real costs, all be it sometimes not broken down into enough detail. But, they can provide a good starting point to see where things have gone wrong, or gone right. Questions that should be raised from annual accounts are as simple as:

Did I make a profit?

Did the profit cover my drawings?

Did my balance sheet improve?

Is my output, measured by sales, growing?

Are my costs increasing faster than my output?

These questions will provide a starting point for some decisions on best way forward.

In the current climate of falling milk prices it is easy to become despondent, but in most situations there are things that can be done. An important starting point is to benchmark your business and see where weaknesses lie. CARA as a company produce management accounts for many farms, which enable like to like comparisons. This process gives producers a real pence per litre cost of production, and shows where improvements can be made.

Contact us if you are interested in moving your business forward and seeing how you can reduce your production cost.

Many farmer’s have yet to order fertiliser, and this now seems like a good decision. The price is forecast to reduce, notably for nitrogen based products. There is currently, and locally some exceptionally good deals available on urea fertiliser, which should be considered.

When comparing fertiliser, it is best to use the price per unit or kilo of nutrient. For example 1 tonne of urea contains 460 kilos of nitrogen, at a cost of £275 per tonne this is 60 pence per kilo of nutrient. For ammonia nitrate to compete (345 kilos of nitrogen per tonne) it should be no more than £207 per tonne – certainly food for thought!

The best advice would be to order at least early spring requirements soon to guarantee product on farm for spreading in February / March.

Elin Jones has announced that there will be a further £6.8m of support given to the organic sector in Wales. The result of this is that all the applications made this year to enter the scheme will be accepted. It will also allow for more applications to be accepted to the 2009 scheme.

 There will be a total of £7.5m available in 2009-2010 and £5.5m in 2010-11. This means that payments have started with most farms receiving 70% of their total now.

If you are considering converting to organic farming then the advice would be to think about it as soon as possible to make sure you are in the first come first served bracket for the forthcoming year.

However in the same breath it’s advised that all farmers wishing to convert should apply for Assembly Government support before starting the conversion process.  This will enable farmers thinking about converting to be given a commitment of support or clear advice that they will not be supported and thus allow them to make informed business decisions. 

This good news won’t be such good news for others as the money has been taken away from other schemes to fund the organic applications. The result of this is that there will be a change in three other areas, these being

1)      All applications made for the Tir Cynnal Scheme on the SAF in 2008 will be put on hold for now until an Axis 2 review has been made.

2)      Tir Gofal applications that don’t reach the 100 points required for the scheme will be discarded without a visit and only those farms offering the best environmental result will be further pursued

3)      The Catchment Sensitive Farming Scheme will be delayed until April 2010 instead of late 2009. The number of catchment areas will however remain the same.

So often the case when cows are not milking well or milk butterfats and protein are poor the nutritionist gets the phone call to resolve the problem. The breeding advisor/technician is called when cows are not cycling, holding to services and the vet with issues such as ketosis, displaced abomasums, milk fevers’s, metritis etc etc.

Many of the issues raised can in fact be linked and one issue leads to another, yet on most dairy units the nutritionist, breeding advisor and vet never meet or know what issues they are having with mutual farms. Occasional but regular joint meetings can have significant impact on technical performance of a dairy unit.

An example might be significant incidence of displaced abomasums which is likely to be linked to dry cow management and nutrition. Low milk proteins, falling condition score and poor conception rates may be linked to energy levels of the milking cow diet. Working as a team on dairy units can result in problems being diagnosed quicker and therefore being resolved sooner. This has significant impact on dairy cow performance and therefore farm returns. Team approach avoids the SOS approach to managing a dairy unit and can lead to less vet visits to treat sick cows and by the breeding technician for repeat services.

The national minimum wage will increase from 1st October 2008. From this date, you will need to ensure that all staff are getting at least the new minimum wage per hour; appropriate to their age.  Below are last years rates and the new rates for this year:

National Minimum Wage rates from 1 October 2007

• Workers aged 22 and over – £5.52 per hour
• Workers aged 18-21 –         £4.60 per hour
• Workers aged 16-17 –         £3.40 per hour
• Accommodation offset –      £4.30 per day (£30.10 per week)

New National Minimum Wage rates from 1 October 2008

• Workers aged 22 and over – £5.73 per hour
• Workers aged 18-21 –         £4.77 per hour
• Workers aged 16-17 –         £3.53 per hour
• Accommodation offset –      £4.46 per day (£31.22 per week)

If you have any queries regarding payroll, please contact us and we will be happy to help.

The credit crunch seems to be the only news meriting any attention at present, but is this really having an impact on the agricultural sector? The major impact will be seen by new borrowers or those restructuring debt. In these circumstances, the cost of raising funds at bank level is increased, and therefore this will be passed onto the borrower.

In basic terms, although most owner occupier farmers have reasonable levels of security, new debt may not be at such good rates as previously seen. In order to prise as good a deal as possible out of the bank there are several things you can do to help:

1.       Ensure you ask for the correct amount of capital – asking for more at a later date is a sign of poor planning

2.       Structure the debt over the correct period – too quick a repayment period will see overdraft pressure

3.       Make sure you have an up to date balance sheet and farm valuation – security is still vital

4.       Always allow for some sensitivity and over spend in plans and budgets

5.       FINALLY … Show the bank a professionally produced business plan. (CARA does these regularly) 

Having all five factors above covered will gain respect and understanding from the bank manager and help in negotiating a competitive rate of borrowing.

As of midnight on the 1^st of September the whole of Wales has been included in the bluetongue protection zone.  This means that the area that covered the South East of Wales has been extended to cover the whole country.

The extension to the zone means that farmers are able to move their stock from Wales to all areas of England that are in the protection zone. Stock can only be moved to a “free” area if they have been vaccinated under a vet’s supervision, subject to a 60 day standstill or 35 days if a blood test establishes immunity. Stock can be moved into Wales from all areas in the protection zone as well as the free areas which will come as good news to many people wanting to purchase animals at any forthcoming Autumn Sales.  Farmers are however urged not to move animals from areas of higher risk unless needed.

Farmers have been urged to vaccinate their stock as soon as possible as September is a month of high risk for the disease and it was the month when the first case was reported a year ago. The vaccine is available by ordering it from your vet.

The vaccine comes in 50ml and 20ml bottles, and is available through private veterinarians via veterinary wholesalers.

The wholesale “list” price is reported to be £22.02 for the 50ml bottles and £13.10 for the 20ml bottles.

The final on-farm price is likely to be around £27.50-£33.00 for the 50ml bottles (55-66p per ml) and around £16.35-£19.65 for the 20ml bottles (82-98p per ml) plus VAT, to cover the overhead, handling and administration charges throughout the distribution process.

Farmers are reminded that the vaccine will require a 1 ml dose in sheep and two separate 1 ml doses in cattle.

From September 2008 tax codes for many employees are going to change. The personal allowance (free pay) in 2008/09 for people under 65 will increase from £5435 to £6035.  This means that employees are now able to earn £116 per week or £503 per month before tax and N.I. are applied.  The new emergency tax code will be 603L. HM Revenue & Customs (HMRC) will be sending out a revised Employer CD-ROM; 2008 (August), which will include updated tools for calculating payroll.  If you use a payroll system, you should be sent an update in August.  If you have not received the update yet, contact your payroll provider. 

The new tax codes must be used from the first payday on or after 7th September 2008. The table below (taken from HMRC website) shows the changes that will need to be made to your employees’ tax codes. 

 More information can be found on HMRC website: http://www.hmrc.gov.uk/employers/epa-basicrate.htm

The last couple of years we have seen semen companies trying to find different ways of maintaining and increase their market share in this declining market place. The latest method of enticing new customers is to offer aid with heat detection and ultimately getting the cow back in calf. Different services are being offered from daily on farm service to cow collars which record change in cow behaviour.

Let’s face it semen companies make their money from semen sales (with a very lucrative margin) and will offer all sorts of gimmicks to maintain and increase their market share. All you as a dairy farm need is a cow in calf calving every year.

There are all sorts of issues which affect fertility from nutrition, health, minerals etc however it is widely accepted that the major reason cows are not getting back in calf is poor observation in catching cows in heat. Over the last decade herd sizes have increased significantly and number of cows to a man ratio with it. This has resulted in less time being available to give to the routine of observing cows and heat detection. There is also the added problem of the modern dairy cow showing oestrus signs for a shorter period. Over 55% of cows remain on heat for less than 8 hours and 43 % show heat signs between midnight and 6 am.

Paying for a semen company to help with heat detection and ultimately get cows back in calf is money well spent so long as it works and the fertility does actually improve. Many farms have signed on to one of these new systems but are not monitoring whether the results are any better than before. If you pay a professional to do a job then the least you can expect is that the job will be done better than you can do it.

There are various fertility indices used by the industry to measure and monitor fertility:

                                                                                    TARGET

Calving index                                                              <370 days

Interval to 1^st service                                                  60 days

Conception Rate                                                         60%    

Services to Conception                                               1.65

Heat Detection Rate                                                   70%

Pregnancy Rate                                                           36%

80 Day Submission Rate                                             85%

100 Day in Calf Rate                                                   95%

200 Day Not In Calf Rate                                            6%

All these indices have their uses. The danger is that your semen salesman and/or advisor will select the index which shows him/her in best light and not what is really happening. For example take the first two on the list, these indices only evaluate cows that have been served and exclude cows with no service date.

Challenge your breeding advisor today to ensure that the service you pay for is value for money.  If you do not have a strategy and your fertility is poor maybe you should think of employing an external service today. To review your dairy cow fertility strategies contact us at CARA.