Collaborating in the dairy sector

Collaborating with others can help you reduce costs and add value to your farm business, as well as providing many other potential financial and lifestyle benefits.

Measuring the value of collaboration in the dairy sector is difficult because of the variety of different levels and types of collaborative ventures and because many of the benefits are not financial. However, many of our  case studies show considerable financial savings on the cost of labour and machinery.

Other potential benefits of collaboration might include:

• Sharing of knowledge and ideas
  
• Sharing of risk and capital outlay
  
• Increased satisfaction and fun of working with others
  
• Improved machinery specification, giving higher outputs and thereby improving efficiency
  
• Additional time to purse other interests or business opportunities
  
• Increased management capability, bringing forward progressive ideas

Example - Berry's ABD joint farming venture

Berry's ADB joint farming venture is an example of a joint venture between two similarly sized neighbouring farm businesses, both with relatively small herds. Both needed to invest heavily in parlours and other equipment and to boost their cow numbers to survive. The case study demonstrates how collaboration in the milk sector can achieve real savings, although farmers do not have to take the bold move of fully integrating their business with another to realise significant benefit.

After seeking advice they decided to collectively invest in a new rotary parlour, bulk tank and dairy equipment at a total investment of £150,000. As a result they were able to reduce labour costs, increase yield and also benefited from additional gains such as every other day collection because of their additional tank capacity.

The partners also benefited from working together having less pressure, more support and more time off.

The JV has generated an additional £40,000 or 2ppl on 2 million litres net of costs and has enabled the two farmers to maintain their dairy enterprises, which could otherwise have been very difficult. The table below shows a combined budget for the combined farm; additional quota earns an additional £37,000. The new bulk tank allows the combined farm to earn an extra £13,500 from every-other-day collections and quality bonuses. Finally the combined farm has improved efficiencies providing a paid labour saving of £10,000.

Source: Howard Hughes, Berrys ABD, in HSBC Forward Planning 2007

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• Collaborating in the dairy sector
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