Dairy farming is an exciting business; though not for the faint hearted. There are no bad days in dairy farming – as long as milk is there, there will be cash flows – sometimes insufficient. But as they say, everyday is a character building day.
A lot of things need to be calibrated everyday to make money – many of them not in farmer’s hands.
Given the changing landscape in the COVID era, we asked a group of progressive dairy farmers, dairy professionals, financial consultants, dairy technologists, dairy marketplace startup founders to create a checklist for new farms that addresses the changing landscape in the COVID/ Post COVID era.
Trends dominating dairy project under construction in 2020 COVID Era:
- Uncertainty due to possibilities of future lockdowns.
- Poor demand outlook due to shutdown of hotels etc. One may have to retail directly to find a strong market.
- Uncertainty over a weakened economy.
- Higher input costs due to changes in global supply chain dynamics.
- Time overrun on projects due to lockdown with the possibility of missing breeding season.
- Work with local manpower – costs may be higher but risks from movement are significant.
- Plan effective incentive schemes.
- Use an effective attendance tracking solution, designed to work even in your absence due to #stayathome guidelines applicable to you. Attendance tracking solution should allow for peer review of attendance records.
- Renegotiate your costs and payment terms unless money has already exchanged hands. Save every penny.
- Negotiate well. Pre covid era is over. Start with a basic milking pipeline setup and get a movable shed. Focus on cash flows. Vendors will lineup on your terms once you start operations. Stay smart. It is easy to invest money. But a zillion times more difficult to recover from profits. Let money remain in pocket.
- There are many marketplace applications that help sell. Get the cash engine running as soon as possible by outsourcing deliveries.
- Best if fodder can be grown for own consumption. Overall improvement in margins will be around 10%. But it is a tough cookie to crack. And most new-gen urban farmers could focus on their marketing efforts instead.
INVENTORY AND REORDER LEVELS
- Carefully examine inventory reorder levels and holding periods to ensure that stock-outs are avoided.
- Avoid bank funding by reducing project investment. If debt being taken, structure it well – balloon structure with first principal repayment at the end of 5 years.
- Time remains a critical parameter — especially with work hour restrictions, limited delivery windows, increased distancing culture etc.
- Stay informed. Join farmer whatsapp groups. Join Cattlemen forum to articulate queries and concerns and to know what all is happening.