The farm faces many of the challenges typical of a Northland farm with 30% of the farm of rolling contour, flats prone to wet and flooding and 40% of the farm in kikuyu.
The budgeting approach taken is to deflate revenue and inflate costs. This ensures there is enough leeway in the budget to cope with the extreme variations in climate that are typical for Northland. (2017-18 rainfall was 50% higher than the 10 year average). The budgeted operating profit each year appears only modest but is usually reflective of a worst case scenario.
The 2018-19 budget includes a second paid labour unit as part of planned approach for the owners to step back farm the day to day on farm work. The net effect is an additional $0.27 per kg MS for operating expenses for the first season.
2018-19 Numbers at a glance
|Total kgMS||Cows milked||Hectares (effective)||Net Dairy Cash Income
|Total Farm Working Expenses
|Total Operating Expenses ($/kgMS)||Dairy Operating profit
2018-19 half-yearly update: December 2018
Six months into the season this farm has provided an update on how they are tracking, what, if any major challenges to their budgets they are facing and plans for managing any variances for the rest of the season.
Season to date 12-12-2018
Production to the 30-11-2018 is 62,801 (392 kg MS per ha and 54% of budgeted total of 719 kg MS per ha). This is 9% ahead to the same period last season and slightly up on budget.
Rainfall for the first half of this season is 18% less than 2017. More importantly the distribution was much more favourable with August to October being much lower than the previous years. This has resulted in more pasture grown and utilised through late winter and spring. There is less pasture damage and this is reflected in the increased milk production to date.
Minimal imported feed has been used for the milking herd this spring so direct costs of production are down. No supplements have been made on the milking platform or the support block again this season.
Income to date is similar to budget, milk revenue is down slightly but calf sales are up. Farm working expenses are up on budget to date due to some unforeseen R & M needed on staff housing.
Production is up 8% on last season on a daily basis at present. Cow condition score is good and higher than the same time last season. Pasture cover is on target and is of good quality. Soil moisture levels are better than last year and current growth rates are above average for this time of year.
Given the current situation as out lined and the crops to be grazed from January, the target seasons production of 115,000 is still achievable.
The budgeted farm working expenses are still on track but careful monitoring will be needed to ensure that they stay under control.
Plans to manage risks
Like many Northland farms drought is a big risk for this farm. This is always more of a challenge when there is a weakening milk price.
Should a drought be imminent stocking rate will be reduced to 2.2 cows per ha which will reduce demand to under 30 kg DM/ha per day.
The budget has been updated with the latest milk price. There is scope to reduce some costs if need be but at this stage the cash flow still looks strong and all planned capital expenditure and debt repayments can still be met out of cash flow.
Feed and Pasture
- Rain fall for 2018 to Dec 7th was 670 mm. This compares with 812 mm for the same period in 2017. The winter and spring rainfall was 18% less than 2017. 850 mm rain fell from Jan 18 to May 18 so soil conditions going into the winter were very wet and June rainfall was above average.
- Soil conditions are currently very good. Recent rainfall (90 mm in late November–early December) has meant the soil is soft enough for more paddocks to be rolled.
- Only imported supplement fed was 10 t PKE, 9 t of this was fed to yearlings on the support block. The balance was fed to cows on several really bad weather days.
- Still have about 50 t PKE in the budget that could be used if the summer/autumn turns dry, however the stocking rate will be reduced first, and the price and payout need to acceptable.
- Recent wet and stormy weather has affected early December production which was slightly behind budget. Last 3 days production is comparable with last season/budget.
- Pasture cover is 1900 kg DM per has which is on target for this farm at this time of year. The kikyu is starting to grow now so careful management is needed from now on to control and maintain quality. Annuals, (sown into kikyu last autumn), are still growing well. No topping has been needed.
- There is 13 ha planted in leafy turnip crop due to be grazed early January. Should get 6 t DM from first grazing. There may get a little extra from some regrowth. 9 ha of the leafy turnips can be irrigated with effluent.
- 3 ha planted with plantain/turnips. Plantain/Turnips due to be grazed late January. Cropped area is slightly down on budget, (had budgeted for 18 ha total of crop and only have 16 ha). This has not impacted the budget very much.
- Had $2,000 in the budget for making supplement which has not been spent. Still plan to buy 450 bales of hay at the end of December.
- Weather and soil conditions to date have been a lot better than the last 2 years so have used a little more N to date. N use is 110 kg/ha to date. Plan was to apply 190 kg N for the season but will now only do one more application so will be more like 140 kg N per ha for the year so that will be down on budget.
Calving and reproduction
- July 11th is PSC. Calving to mid-point was 16 days which was similar to last year.
- Three week submission rate was 96% (this was with using 30 CIDRs). 3 week submission rate for first calvers was 100%
- Current cow condition score is 4.3-4.5 which is better than last season.
- Pregnancy testing is booked for early February so will then be able to start culling empties mid-February. Prepared to cull up to 50 cow in mid-February if need be, and so take a lower stocking rate through the latter part of the summer and into autumn.
Other points of interest
- Peak cows milked is 395 which is exactly on budget.
- Fertiliser and N expenses are a little up on budget. Some of that is timing but the prices of both Fertiliser and Nitrogen are higher than when the original budget was done so this will be closely monitored and quantities may be reduced to control the costs if need be.
- R & M for houses is up on budget due to unforeseen circumstances.
- Expenses to the end of November are on budget but there is quite a bit of variation. Feed bought and made is down, as is power.
- Calf rearing is up about $2,000, as it was decided to use milk powder, (at $6.50 per kg MS this was cheaper).
- Number of calves reared is 90 (as per budget). Had a good run of heifer calves so sold 30 replacement heifer calves at 10 day old which has improved stock sales.
- Income is $6,000 down on budget to date – the lack of October dividend, ($22,000 in the budget), has been offset by more $16,000 more milk income, partly from more milk production and partly from a slightly higher deferred milk payment.
Bio-security & Environment
- All boundaries except one are 7 wire post and batten with hot wire on the inside, or share a boundary with the river, drains or the road, so interaction with other stock is unlikely.
- Scrubbing stations are set up at the Dairy shed.
- Currently in the process of developing a 5 ha wetland. Just over 1000 trees have been planted.
- Early calving, (July 2 for heifers and July 9 for cows), and short calving spread (9 weeks) to make use of good pasture growth before the end of December
- Operate a split herd policy to ensure first calvers, old cows and sick cows are preferentially fed and don’t have to walk too far. The split is about 150 young/sick cows and 245 mature cows
- Have a big focus on mating, with all anoestrus cows being treated early to ensure all cows have at least one mating in 4 weeks of AB. Achieve 99% submission rate in 4 weeks
- 2017-18 mating was very good, with an 84% six week in calf rate, which means that 50% of the herd will be calved within 13 days of the planned start of calving
- Once a day milking all year for family and lifestyle reasons
- For 2018-19 an additional full time staff member will be employed. With the expected quick calving pattern for the coming season, an extra labour unit will reduce pressure on all concerned and allow more time for the owners to work on the business rather than in it. This season they anticipate reducing their time on farm by about 30%. With increasing family commitments the plan is for the owners to reduce their time on farm even further over the next few years.
- Good pasture management is key. Northland pasture growth can vary quickly (particularly the kikuyu), so regular monitoring all year, using grazing interval and pre/post grazing heights ensure pasture quality is maintained
- Wintering cows off is critical to supporting early calving and minimising pasture damage during the winter. 180 cows will be wintered off this winter
- Focus on strategies that will continue to increase pasture grown and pasture utilised (averages 9.25 t DM/ha 3 year average)
- 15ha of summer crops are planted as part of a pasture renewal/kikuyu control policy, and for summer feed
- Strategic use of N
- Continue to apply fertiliser as per soil test recommendations
- Kikuyu is over sown with Italian ryegrass and mulched in the autumn to promote better winter early spring growth
- Minimal imported supplements used. The average for the previous two years is 550 kg DM per ha. PKE use less than 140 kg DM per cow
- A focus on good genetics and a high 4 week submission rate to AB has resulted in surplus quality replacements for sale
- Continue to improve pasture and farm infrastructure
Key success factors
- Have a sustainable business plan that is profit focused but also ensures the owners are able to enjoy time spent with family and friends
- Prepare own cash flow budgets and monitor and update it regularly, so always know current cash position
- Have a good relationship with accountant and banker. Use their expertise to ensure the business is run efficiently
- Value and recognise contributions from staff. Encourage staff to participate in completing further dairy farm related education. Appreciate the different perspectives they can bring
- Actively involved in discussion groups. Keep up to date with new innovations and information
- Continue to repay debt and strengthen financial position