The 18/19 budget is based on 599 Friesian cows (3.00 cows per ha), producing 300,000 kg Milksolids (501 kg per cow and 1,523 per ha). No crop is grown on the milking area. Cows come home from winter grazing and calve directly onto pasture. A 50/50 mix of PKE and corn gluten pellets is fed in shed during the spring and early summer at the rate of 1 kg per cow per day.
This season, the milking area is supported by 83 ha of support land (69 ha leased and 14 ha owned). This area provides all young stock grazing, silage, and some winter grazing. This 2018 winter is the last season winter crop will be used on the support block. Only baleage and pasture will be used for wintering from 2019.
The budget provided is considered to be conservative with the advance price used being about $0.70 less than the company forecast (as at 31/5/2018), and budgeted costs are generous. The surplus generated will be applied to additional debt repayment, taxation and further purchase of Fonterra shares.
The longer term challenge is still...."can this farm achieve 3.0 cows per ha, 1,500 kg MS per ha for close to $3.00 per kg MS cost structure?"
2018/19 Numbers at a glance
|Total KgMS||Cows Milked||Hectares (effective)||
Net Dairy Cash Income
Total Farm Working Expenses
|Total Operating Expenses ($/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 5-12-2018
Rainfall to the end of November, (for the calendar year), was 1030 mm which is up on the district average of 880-920 mm. It has been evenly spread so soil conditions have been reasonable through winter and spring.
A mild winter and reasonable weather during calving along with a few more cows and a more concentrated calving have contributed production being up about 8% on last season, (6% on budget).
November income was up 20% on budget. Farm working expenses are up on budget, mainly R & M, although additional baleage has been made/bought in preparation for more animals wintered on the milking area next year.
Milksolids per day are a little behind last year on a daily basis partly due to feed quality as a result of some recent very high growth rates, (100 kg DM/ha/day). Current pasture cover is similar to last season and on target at 2,100-2,200 kg DM/ha.
Cow condition is good and again similar to this time last year. Baleage on hand is on target and imported supplements of PKE/corn gluten pellet are on budget.
Production of 300,000 for the season is still well on target, (which is 2% up on last season), so continued monitoring of costs will be critical to ensuring the gains from the budgeted production increase will not be eroded.
Plans to manage risks
The main risks to the business at present are the softening milk price, managing pasture quality with the current very high growth rates and of course if it turns dry in the summer like last year.
Current feed budgets show that existing reserves, pasture cover and planned imported feed should secure reasonable summer, early autumn production. Focus needs to be on regaining control of pasture quality over the next couple of weeks, and that is happening with topping and managing post grazing residuals.
There is always scope to reduce stocking rate once pregnancy testing is done should there be any extreme weather events.
The updated cash flow is still looking strong despite the softening in milk price. Being conservative on milk price when budgeting, ($4.36 per kg MS), has given a good buffer against this.
Feed and Pasture
- Production to date, (5-12-2018) is 127,972 which is 9,800 kg MS, (8.3%), up on last season, (294,000 kg). The season’s budget is for 300,000 kg MS, (6,000 kg more).
- Have used less 25% less nitrogen to date due to the good pasture growth. Applications so far are 85 kg N per ha.
- Currently following cows with light application to push feed through into the summer.
- Supplements fed are on budget although extra PKE was fed during early November due to the wet and cold conditions.
- Have been able to contract some of the feed at less than the budgeted $250 per t PKE and $410 per t corn gluten pellets.
- Made 300 bales silage on the milking platform so far.
- 1300 bales made on support land with 600 still to make.
- Purchased 340 bales silage in anticipation of getting resource consent to milk on additional 11 ha purchased 2016, and so wintering 100-200 more cows at home.
Calving and reproduction
- Peak cows milked 599 (on budget).
- Mid-point for Calving was 14 days from PSC which was 7/8/2018.
- Numbers calved after 3 weeks was 70%, (80% 2 year olds calved after 3 weeks), 6 weeks, 89%, 9 week, 98%
- Three week submission rate is 84% which is slightly down on the previous year.
- After 5 ½ weeks mating the returns are similar to last year. 17-18 NRR was 71%.
Other points of interest
- Milk revenue to the end of November is $130,000 above budget as the kg milksolids is well up and the budget was conservatively based on $4.36 per kg MS advance. This is still lower than the current milk price forecast.
- Demand was high for bull calves so calf sales are up slightly.
- R & M costs will be up slightly as the vet race at the support block has been upgraded so cows can be run through. This was not in the original budget.
- The consent application to milk another 100 cows with and additional 14 ha and increase overall stocking rate to 3.2 is still in progress and the cost to date is $15,000 and climbing. This would be the biggest variation in the budget, which only had $5,550 allocated.
- Shed repairs are up $13,000 on budget due to additional R & M and a service for the platform.
- Building repairs are up - unplanned additional storage for PKE.
- Baleage making/purchased up due to 340 extra bales of baleage made/purchased for wintering next season. This will be offset by a feed inventory adjustment.
- Have been able to make some capital expenditure out of cash flow, including a calf feeder and a grain silo. Plan to purchase another tractor so more work can be done earlier and so be more timely.
Bio-security & Environment
- Additional fencing has been done as a result of the M Bovis situation in Southland. One wire fences 1.5 m from the boundary have been erected where needed which has cost about $2,000. This was not in the budget.
- Liaise with neighbour on the support block so that stock are not in boundary paddocks at the same time.
- Still focused on getting consent for increasing stocking rate and milking area.
- The budget for next year will include allocation for fencing and riparian planting.
- The farm was converted from sheep 6 years ago so infrastructure is relatively new and is compliant.
- Maximise pasture quality and utilisation by monitoring pasture cover and use of feed budgeting/spring rotation planner to ensure targets for feed cover met.
- Ensure targets for cow condition are met by doing BCS throughout the season.
- Dry off based on pasture cover and cow condition.
- Minimise pasture damage.
- No crop grown on milking area and plan to have no crop grown on support land after the 2018 winter.
- Feed corn gluten pellet/PKE at 600-700 kg DM per cow.
- All heifer grazing is on leased or owned support blocks.
- Attention is given to ensuring young stock achieve or all recommended live weight targets. Young stock are well grown. At the end of May 2018 the R 3 cows were only 15 kg lighter than the mature herd.
- R 2 heifers are wintered on support block, majority of MA cows go away to external winter grazing.
- Cows come home from wintering and fed pasture and baleage. Use 3 standoff areas for springers.
- Labour management – good communication so staff aware of farm policies and can implement them.
- Cost management - use a realistic budget. Southland has little variance in production. By monitoring budget closely, we can react if needed. Control the controllable. We can control our production and our costs, but we can’t control what we get paid. We do know our numbers inside out. In saying that we aren’t perfect and still have plenty of areas to improve. Our focus is being as efficient as possible with per cow and per hectare production and keeping our costs to a sustainable low level.
Key success factors
- Prepare own budgets, review, update regularly so always aware of financial position and can take advantage of opportunities as they arise.
- Prioritise debt repayment.
- Focus on basics - have a simple system that is easily implemented.
- Long term goals/vision.
- Have good management team – bankers/accountants, consultants and utilise expertise.