This System 2, 160 ha farm, milking 395 crossbred cows once a day, is budgeted to produce 115,000 kg MS for the 2018-19 season, (291 kg MS per cow and 719 kg MS per ha). Operating expenses for forecast to be $4.45 per kg MS (FWE $3.72).

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
($/kg MS)
Total Farm Working Expenses
($/kg MS)
Total Operating Expenses ($/kgMS) Dairy Operating profit
115,000 395 160 $7.25 $3.72 $4.45 $1,935

2018/19 Forecast Budget

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Income $TOTAL $/KgMS $/COW $/HA
Net Milk Sales

Milk revenue for 2018-19 is based on 115,000 kg MS @ $5.05 per kg MS advance, 111,915 kg MS @ $1.21 per kg MS deferred and116,000 shares @ $0.30 per share dividend payments. Milk revenue is reported net of the DairyNZ levy of 3.6 c per kg MS on 115,000 kg MS.This milk income is the farmers best estimate of their likely net milk sales. It may or may not be out of date based on new information from Dairy Companies. It does not necessarily reflect DairyNZ's milk price forecast.

746,440 6.49 1,890 4,665
Net Dairy Livestock Sales

75 MA cows @ $600, 200 bobbies @ $30, 60 bull calves $80, and 19 surplus in calf heifers @ 1300.

80,000 0.70 203 500
Other Dairy Cash Income

Surplus housing rented out.

7,800 0.07 20 49
Net Dairy Cash Income 834,240 7.25 2,112 5,214

Expenses $TOTAL $/KgMS $/COW $/HA

Covers 2 FTE external labour.

(incl. ACC)
98,000 0.85 248 613
Animal health

Philosophy is preventative rather than reactive. With OAD milking have to be very vigilant with mastitis detection and treatment. Policy is to use dry cow therapy on all cows with SCC over 120,000. 2018-19 about 60 % were in the dry cow therapy group. Includes anoestrus treatment for 30-40 cows. This is seen as important as the aim is to give every cow in the herd at least one chance at AB. Six week in calf rate for 17-18 is 84%. Ear tags, calf dehorning, pregnancy testing, vaccinations and minerals are all included under this cost. Effort is made to combine several jobs with vet visits to reduce costs eg Lepto vaccination and pregnancy testing.

27,700 0.24 70 173
Breeding and herd improvement

The genetics of the herd is important and effort is made to continually increase the genetic merit of the herd. This cost covers MINDA, Herd testing (4 times per year), DNA testing of all replacement calves (now in 5th year of DNA testing). Lease 8 Jersey bulls for the heifers, and plan to do 4 weeks AB with dairy bulls and beef buylls for low BW cows, and 5 weeks of AB using short gestation beef and Jersey bulls. Total length of mating will be 9 weeks with AB. Replacement rate average for last 3 years is 20%.

20,400 0.18 52 128
Farm dairy

OAD milking so only using detergents etc once a day. Rubberware is changed annually or as needed.

5,100 0.04 13 32

Milking once a day all season, through a 32 bale herringbone shed. Use hot wash once a day. Farm water is pumped to tanks and gravity fed to the farm. Includes power to pumps at support block.

(farm dairy, water supply)
21,500 0.19 54 134
Supplements made

Have budgeted for about 5 ha of silage but the last 2 season there has been no surplus and so no silage has been made.

(incl. Contractors)
2,000 0.02 5 13
Supplements purchased

450 bales (1 bale equivalent) are purchased each year to be used for administering causmag. Have a contingency in the budget this year for 60 t PKE ($15,000) which is double what is usually budgeted for. This is partly because of the eariler expected mean calving date and also because the last two springs have been extremely wet and pasture utilisation has been very low.

20,400 0.18 52 128
Calf rearing

Total of 100 calves reared. Reared on whole milk/colostrum, meal (8 t meal) and pasture. Some Rumenex will be used so calves can be weaned earlier.

14,500 0.13 37 91
Young and drystock grazing

Have allowed for up to 30 R 2 heifers for 30 weeks @ $8.50 per head per week.

8,300 0.07 21 52
Winter grazing

180 cows away for an average of 6 weeks @15 per head per week. This year there is no freight as the grazing is closer enough that the stock can walk.

25,000 0.22 63 156
Support block lease

40 ha support block is used for grazing the R 2 heifers plus the remaining weaners from October.

21,800 0.19 55 136

Have increased the budget slightly on 17-18 season as there are still areas of the farm that need the fertility and pH lifted. The farm now has the capability to apply effluent to up to 40 ha via a travelling irrigator, (previously it was stored and spread on crop paddocks). All fertiliser spreading is done by the farmer and the cost includes the 160 ha of milking land plus the 40 ha of support land. Budget is for 190 kg N per ha on the milking area. Policy is to apply at 30-40 kg N per ha so have budgetd for 5-6 applications for the year - ususally 1-2 before winter and then 4-5 applications behind the cows till late October/early November. Nitrogen used is either Ammonium sulphate based if sulphur is needed or urea. Fertiliser applied is 15% potassic super. One third of the farm will have 1 t per ha of lime applied as per soil test recommendations.

(incl. N)
74,300 0.65 188 464
Regrassing & cropping

Crops grown for 2018-19 will be 15 ha of leafy turnip and 3 ha of turnips/plantain. 7-8 ha of the lefy turnip crop will be planted on the effluent area to take advantage of the irrigation and fertility applied. This will reduce the amount of crop fertiliser required. Cost covers cultivation and seed sowing (rotary hoe and sowing of crop, and drilling of permanent pasture grass seed in the autumn), as well as the cost of seed. It also includes the cost of Italian rye grass for over sowing on 68 ha of Kikuyu.

10,000 0.09 25 63
Weed and pest

The farm is blanket sprayed for broad leaf weeds in the winter - 2/3 is done by a contrator and incorporates a liquid N application. The spray for the winter spray was purchased in the 17-18 season so the weed and pest cost this season is lower than usual. The cost includes the sprays for spot spraying during the year, some blackberry control and spraying out the pasture for the crops as well as weed sprays for the new grass. Slug bait for some of the new grass area is also included.

4,500 0.04 11 28
Vehicles & fuel

The fuel cost is $12,000. Farmer does own fertiliser spreading, ripping and rolling of crop paddocks, mulching of kikuyu. Most of the other tractor work is done by contractors (hoeing and planting crops and drilling new grass, effluent spreading and silage making). Tractor is only 2 years old so R & M is low. Farm runs a large 4 wheel drive tractor and a little old 2 wheel drive tractor, plus 2 quad bikes and one 2 wheeler. Policy is for regular maintenance of vehicles and to monitor R & M and use that as a guide for when vehicle upgrades are necessary.

21,700 0.19 55 136

Frequently monitor farm infrastructure and plant so maintenance is carried out before a situation is critical. Extensive drainage and track maintenance was carried out in 2017-18 so R & M for 2018-19 is expected to be low. Includes freight for sawdust.

(land, buildings, plant, machinery)
15,600 0.14 39 98
Freight and general farm expenses

Includes $3,000 for stock and general freight plus protective clothing and dogs.

4,570 0.04 12 29

Do own GST, PAYE and admin.

6,300 0.05 16 39
15,950 0.14 40 100

Includes rates for 40 ha leased support block.

10,000 0.09 25 63
Total Farm Working Expenses 427,620 3.72 1,083 2,673
Cash Operating Surplus 406,620 3.54 1,029 2,541

Non-cash adjustments have been included below the cash analysis to enable fairer comparisons to be made between farms. These adjustments are not part of a cash budget however to fully understand the efficiency of the farm business they are an important aspect.

Non-cash adjustments $TOTAL $/KgMS $/COW $/HA
Value of change in Dairy livestock

Budget to have 19 less R 1 heifers on hand compared with last year and similar numbers of R 2 heifers and MA cows. 2018 IRD National Average Market Values are used.

-13,000 -0.11 -33 -81
Labour adjustment

This is for 0.8 FTE of shareholder unpaid labour.

50,000 0.43 127 313

Based on 2016-17 actual depreciation with allowance for further depreciation and additional purchases and sales.

34,000 0.30 86 213
Dairy Gross Farm Revenue 821,240 7.14 2,079 5,133
Dairy Operating Expenses 511,620 4.45 1,295 3,198
Dairy Operating Profit 309,620 2.69 784 1,935

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