Ben and Lizzy started sharemilking in 2013 with $170,000 of equity. With less than the usual experience, they were conscious of the big step they were making from Ben’s earlier job as second in charge on a large 1600 cow South Waikato farm.
However the opportunity Lizzy’s parents Tony and Sally Wilding gave them to come back to the 100ha home farm at Okoroire was one too great to miss. It also continued something of a tradition in the Wilding family.
“Both my brothers had the opportunity to come back and manage or sharemilk on the farm before they progressed, either further into dairying or elsewhere,” says Lizzy.
For Tony and Sally, conscious of treating all family fairly, providing that opportunity was part of that goal, giving one of their daughters a similar run at getting started in the industry.
Three years into their tenure, the couple readily admit they have felt the slide from the dizzying heights of an $8-plus milk price, where money came regularly and relatively easily, to the gloomier “$4-something” period.
“Over the $8/kg MS payout period cashflow was good, not only did this make paying the bills easy but enabled us to make significant debt reductions of $200k,” says Lizzy.
Lizzy takes hands-on role
But since that figure almost halved she has come to play a closer role in the farm business, as self-appointed budget compiler, cost analyst and cashflow manager, alongside her busy role off-farm working for Primary ITO and looking after their 15-month-old son Henry.
Like many, the sharemilking couple faced the cold reality last year as the boomer retro-payments of 2014 petered out, and they faced a winter with zero retro-payments trickling in to the account.
That reality focused their minds upon how to farm smarter as more cost effective sustainable operators.
New opportunites despite conditions
An opportunity to buy the neighbouring 45ha was also one they had not expected to arrive so soon, and one that despite conditions, could not be ignored.
“The timing was not perfect, but we knew it was an opportunity we could not turn down, given how well it fitted alongside the family farm next door,” says Lizzy.
The bank was supportive and Tony could see the succession benefits that having family owning land next door, and also farming at home, would bring.
But his position as chairman of Federated Farmers’ Sharemilkers employers section meant he was more aware than most of the impact volatility was having on sharemilkers, and what it would have on his own family members taking on a larger debt over land.
“We agreed a lease arrangement across the property would be a good way to go forward. It would see the farm costs each party bore combined into one, while a good lease arrangement offered the opportunity to provide some certainty to all parties involved on payments and income.”
To cut things out, you have to know what the numbers are to start with, many don't.
Lizzy and Ben set on a lease arrangement with Tony and Sally that acknowledged that volatility, by setting a rate based on present base production per ha multiplied by milk price, multiplied by 25 percent. The owners also agreed to cap the lease at a $7 milk price.
“This really set a firmer platform for us to go forward on, knowing what the payment was we were up for each month. Every time there is a payout announcement and change, we sit down and re-work it, working out who may owe who more,” says Lizzy.
Setting a clear lease arrangement meant they could then set their attention to tuning up their business and constructively reducing expenses.
The runners up in the Waikato section of the national dairy awards for share farming have matched their skills well to weather the tough times.
Devoted planning is key
Ben admits he is an avid planner, setting a time and place for each step through the farming year that are not compromised, while Lizzy has proven an adept cash manager operator.
That has been reinforced by her working towards the NZ Diploma in Agribusiness Management through Primary ITO.
She has found the business planning and financial papers she has completed invaluable.
“It is a lot more work updating Cash Manager regularly, but you know exactly every week where you are at, if there are any surprises that come, you can see straight away what that is going to mean to your cash-flow and potential further debt.”
Ben and Lizzy feel that some farmers are making knee jerk, rather than planned decisions, considering the implications of productivity and people.
“To cut things out, you have to know what the numbers are to start with, many don’t.”
Deciding which costs to cut
Their first area of focus was the farm’s fertiliser inputs.
“We were fortunate to be on a farm with high phosphate levels already, and it had 60ha covered by effluent system. It meant over autumn we only applied some ammonium phosphate to help release more nitrogen in the system.”
This has helped cut their fertiliser costs back 50 percent on the year before, brought about by no phosphate in spring and spreading their own potash and nitrogen.
The advice is all there, and we are happy to tap into it in areas we are not experts in.
Big changes to feed arrangements
Feed has been subject to some significant changes. While many farmers are looking at reduced crop areas, the Moores have lifted theirs to 14ha split between turnips and swedes, aiming to make minimal grass silage over spring.
Ben calls on his experience cropping in the United Kingdom to do an above average job, cultivating early, preparing seed beds for an earlier than typical sowing date of late September.
The resulting 18-20t DM/hectare yields cuts feed costs by 40 percent by doing all cropping work themselves.
Having swedes, an unusual crop for the Waikato, means he can carry them well forward after the turnips have finished, when the farm is still low on feed in autumn to early winter.
“The swedes keep for longer after the turnips, and planting an early maturing turnip means we can have it back in grass by February.”
They are also dropping maize from the crop regime this year. Losses feeding it in the paddock were too high, and they did not want the capital cost of a feedpad.
Overall feed costs have fallen to 51c/kg MS this season, both a factor of price and volume due to a favourable summer. In the 2014/15 season it was 83c/kg MS. In both years this includes the cost of additional on farm feed through cropping.
Savings on breeding
The third area they have saved in is breeding. After successfully bringing their calving date forward two weeks, the focus this year has been on smarter mating.
This season, they only put their top 300 cows to higher Breeding Worth (BW) bulls using artificial breeding (AB). The remaining 150 were naturally mated to friesian bulls. AB was kept to four weeks and followed up with good bull power.
Their mating costs were halved from $81/cow to $40/cow and empty rates are acceptable at 10 percent. They achieved a 77 percent six-week in-calf rate, slightly down on 80 percent in 2014/15.
The savings were mainly from less intervention and mating detection aids.
Lizzy says animal health costs also halved from $85/cow to $40/cow, by taking more on-farm ownership for cow health.
These key cost focuses have bought Lizzy and Ben’s on-farm working expenses down from $3.85/kg MS to $2.65/kg MS, putting them in a good position to weather another tough year and pay the $1.65/kg MS lease-loan obligations.
They believe this is sustainable for 2016/17, even with some phosphate going back in the fertiliser budget.
With these sorts of numbers, their breakeven position is made up of costs including farm working expenses of $2.65, finance and lease costs of $1.65, and levies and tax of 55 cents, totalling $4.85/kg MS.
Stock sales are 50c/kg MS, so the breakeven milk price for the Moores is $4.35/kg MS.
“Like a lot of farmers, our tax is not going to be an issue for the next 12 months and drawings are well below the 50c/kg allowance.”
Seeking advice from experts
But keeping the operation sustainable over tough times also includes good communication.
Ben has been quick to leverage off the significant skill base he sees surrounding Kiwi dairy farmers, from cropping experts at seed companies, fertiliser reps and experienced bankers.
“The advice is all there, and we are happy to tap into areas we are not experts in.”
This includes regular kitchen table discussions with Tony and more structured meetings with their farm advisor Paul Lawrey of Dairy Solutions.
“Paul challenges us on decisions and keeps us up-to-date on any changes in the industry and markets. He is a very good sounding board.”
Tony’s experience with sharemilker-landowner relationships means he’s happy to “walk the talk” on communication. He’s seen plenty of farm businesses where neither party is happy to release information to the other, or often may not even know the critical cost components of their business.
“I admire these two because they see this as a challenge. It’s not easy, but there are opportunities in the challenge.”
Wise words dealing with tough times
Tony Wilding can watch the challenge his daughter and son-in-law face farming in tough times with more than just the usual empathy one has for family.
He and wife Sally recall the Rogernomics period in the later eighties when farmers faced interest rates approaching 20 percent and a complete deregulation of the economy.
But then, as now, that brought opportunities. Some farmers had their loans discounted, while others like he and Sally, toughed it out.
Tony also sees some similarities then and now in what helps people get through.
“It was really important to keep good company, with people who were positive and who did not talk about getting out of farming. We would talk to people about how they were managing and share ideas.
“We were heavily involved in the farm cadet scheme, and we enjoyed good contact with that group, along with farm discussion groups.”
He believes Lizzy and Ben are adopting a similar philosophy, and even appear to be enjoying the challenge that tougher times have bought. It has given them the opportunity to buy a farm and to tune up their operation’s profitability.
“It’s also important to be open with your accountant and your banker. They will all support you if you are honest and upfront with them.”
He also cautioned his generation of farmers not to be too judgemental on the reaction of younger farmers to tough times.
“Our experiences and our expectations were quite different then, so we try to take care not to impose our thinking or make judgement on how they are coping now.”
This article was originally published in Inside Dairy July 2016