As part of DairyNZ’s Tactics campaign, to help others respond to a low milk price, 18 dairy farmers with a low cost of production (per kg milksolids), made their budgets available online at dairynz.co.nz/tactics. These outline where they are spending their money and the reasons behind key management decisions.
These farmers, from around the country, have achieved impressive results with average farm working expenses of $2.99/kgMS for farm owners and $1.49/kgMS for 50:50 sharemilkers.
Average figures for the owner operators
Key performance indicator
Farm working expenses
$3.55 (includes adjustments such as unpaid labour, runoff adjustments and depreciation)
Average figures for the 50:50 sharemilkers
Key performance indicator
Farm working expenses
$2.08 (includes adjustments such as unpaid labour, runoff adjustments and depreciation)
Note: These averages will update as we grow our group of farmer budgets
How are they doing this?
An intense focus on a small number of very high priority factors is needed to achieve this level of performance. These farmers are generally excellent business managers, have developed simple farm systems that can be profitable at very low milk prices and work with positive people.
The following is a summary of ten management practices and farming philosophies common to most of these farmers. Sit down with your family, business partners or advisors and discuss each area to identify which ones you can focus on to improve your business performance.
1. Longer term goals are essential
- A clear vision for the future is present and understanding of why they are farming.
- Short and long term goals are regularly reviewed.
- Good positive people surround the business, information is shared, and a good team of professionals like bankers and accountants are used to discuss farm performance and longer term strategies.
2. Farm systems are profitable, replicable and simple
- Key farm management decisions revolve around profit.
- The farm system doesn’t change significantly as milk price changes – being profitable no matter the milk price is important. This applies to all farms from systems one to five.
- The farm systems are simple, easy to operate and describe. This also made it easier for many of the farmers to eliminate marginal expense items that did not have high enough returns.
3. Very strong on financial management
- Aggressive debt repayment is practiced during higher payout seasons to reduce risk.
- The farmers generally prepare their own budgets and have full ownership of them. Monthly cashflow budgets are monitored extremely closely.
- Adjustments are made to budgets as milk price changes e.g. repairs and maintenance or fertiliser expenditure.
- Detailed benchmarking is undertaken - these farmers know how they perform from season to season and against their peers.
4. Pasture management is a top priority
- Pasture is the absolute priority and maximising the growth and utilisation is a key to their success.
- Very regular farm walks are completed to measure grass – the data is used in a range of feed budget tools. The spring rotation planner is seen as essential in most cases.
- Pasture cover at calving is seen as critical and long rotation lengths are utilised to build pasture cover from late summer.
- Pasture damage is minimised with on/off grazing when required.
5. Cow condition at calving critical
- Achieving target cow condition at calving was a common theme with defined drying-
- Winter feed is not wasted on fat cows – regular drafting of cows is practiced, based on cow condition.
- Young stock are well grown so they can compete in the herd.
6. The farm team is valued, recognised and included
- Staff are valued and recognised.
- Current economic situation is well communicated and farmers seek ideas from the staff on ways to improve the efficiency of the farm.
- Sharemilkers had open communication lines with farm owners.
- The farm plan is easy to communicate with staff and therefore easy to implement.
- Staff must take holidays to ensure they get rest and minimise liability.
7. Soil fertility is monitored closely
- Soil fertility is very important and paddock soil testing is common, however where phosphate levels are higher than recommended levels, inputs are reduced in most cases.
8. Feed is imported based on price
- Imported feed is kept to a minimum on many of the farms. Those farmers that did purchase higher levels of supplement, used cost per kgDM or MJME as the main purchase criteria and wastage was minimised as much as possible.
9. Around 4 to 10 percent of the farm is grown in a variety of crops
- Given the farms are located from Northland to Southland a variety of crops are grown on most of the farms including turnips, oats, barley, maize, swedes and fodder beet.
- High yielding crops are a focus, minimising the cost per kgDM.
- Crops are used effectively for re-grassing and to shift high energy feed to times of pasture deficit.
10. Repairs and maintenance/contractors are reduced
- Farm is well maintained in good years so spending can be reduced in very low payout seasons.
- Where possible, the farmer completes repairs and maintenance.
- Machinery is always well maintained.