Budgeting, Corrie and Donna Smit (Bay of Plenty)
19 min read
This low input farm near Edgecumbe, Whakatane, has two adjoining dairy farms of similar size making up 160 effective ha milking 580 FX cows. The dairy farms are supported by 52 ha of support block which provides. The farm is low lying which makes it vulnerable to very wet weather in the winter, but less susceptible to summer dry. Pasture harvested for this farm averages 16.5 t DM/ha. This, combined with good cost control has contributed to this business having an operating profit in the top 10% for the district.
Corrie and Donna Smit own this low-input farm business near Edgecumbe, milking on two similar-sized platforms with a support block providing the majority of winter and young stock grazing.
This low-lying farm is vulnerable in wet weather and has been adversely affected by the the heavy rain events that have swept the region in the last 12 months, (the 2022-23 production of 191,600 is the lowest since the 2017 autumn floods).
The 2023-24 budget is based on milksolids production that is about 7-8% lower than usual as the farm is much wetter than normal going into the winter which will affect pasture growth rates in the early part of the season. The farm working expenses include an extra $0.15/kg MS for additional winter grazing and pasture renovation as a consequence of the very wet 2023 autumn the farm has been through.
160ha effective milking platform
Farm size (block nearby):
52ha effective support, (47 ha owned and 5 ha leased)
15/07/2023 cows and heifers
2 (1-10% feed imported)
100% of herd wintered externally
Wintering system (on support block):
203,500 kg MS budgeted, 1,374 kg MS/ha
Production (3 year average):
379 kg MS/cow (production 203,500 kg MS)
We have been farming for several decades, so financially, we are in a better place than many to “weather this storm”. This season has gotten off to a better start than last season so our focus is to capitalise on that good start and concentrate on converting grass to milk.
Our experience from previous downturns means that we will still be reviewing all financial and farming decisions to eliminate any waste and to optimise efficiency. The key things we will focus on are:
What advice would you give to farmers who are either first time sharemilking or farm owners?
For those in their first year of sharemilking or farm ownership it will be really tough. You can farm your way through this by following best practice in everything you do.
What words of positivity would you give to farmers planning for the coming months ahead?
There are many smaller things you can do to make a difference to your cashflow.
Do you have any tips and tricks for looking after your people on farm?
Make sure you continue to let your staff know they are valued members of your team. There are many ways to do this that don't necessarily need to cost much money.
Staff are a very important part of our business. To make sure they know we value them as much as in previous years we have given pay rises to match inflation.
|Financial KPI 2023-24 budget|
|Net dairy cash
|Total farm working
|Dairy operating profit ($/ha)|
|Physical KPI 2022-23 est|
|Pasture and crop
harvested (t DM/ha)
surplus (kg N/ha/yr)
|GHG (t CO2
in-calf rate (%)
Strategy and financial
Farm policy and infrastructure
People, health and safety
|Net Milk Sales
Milk production for the season is budgeted at 203,500 kg MS which is the 3 year average for the farm. Budgeted income is based on an advance milk price total of $6.25/kg MS and a deferred milk price of $1.40/kg MS on 191,600 kg MS. This is net of the DairyNZ, (3.6 c/kg MS total). A dividend of $.30 /share on 240,000 shares is included in the budget.*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 DairyNZs milk price forecast.
|Net Dairy Livestock Sales
This is based on selling 120 surplus/cull MA cows or R 2 heifers @ $500, 50 weaner beef animals @ $500 and approximately 380 bobbies @ $30.
|NET DAIRY CASH INCOME||1,700,800||8.36||2,932||10,630|
|Wages (incl. ACC)
Covers 2 full time herd managers - one for each farm. Provided with a 3 bedroom house each, each herd manager is on a 2 week roster, with 1 day off the first week and 2 days off the second week, plus all statutory holidays and 4 weeks a year annual leave. An additional full time staff member is employed and shared between both farms to provide relief milking, tractor work and any other support needed. They work 5 days on, 2 days off.
This covers minerals via trough treatment, lepto vaccinations, annual blood tests, calf dehorning (with anesthetic), young stock drenches. BVD status is monitored through bulk milk sampling. Cows with low SCC are treated with teat seal at drying off and those with high SCC, (over 150,000), are treated with dry cow therapy. Pregnancy testing via milk sampling is included here.
|Breeding and herd improvement
Includes cost of tail paint, 5 weeks of AB and 3 herd tests per year, (across 2 milkings). There is no reproductive intervention, (anoestrus treatments or metricheck). The breeding policy now is to use premiere sires for most of the herd with some lower BW cows, (about 100), being mated to Hereford semen. The cost includes leasing 12 bulls, (4 for the heifers and 8 for the herd). Mating 2022-23 the herd went on to once a day milking for 2 weeks prior to mating, due to wet soil conditions, poor pasture utilisation and the stress it put the cows under. The not in calf rate was 9% for the season.
Follow recommended milk plant hygiene programme. Use the cheapest priced detergents. This covers two 20 a-side herringbone sheds.
|Electricity (farm dairy, water supply)
Power is for two 20 a-side herringbone sheds.
|Supplements made (incl. Contractors)
Between 40-50 ha of supplement is usually harvested each year. The majority is on the support blocks with the budget based on all baleage to be made. Cost covers contractors baling and wrapping plus incidentals. Budget is based on 550-600 bales, (180 kg DM), @ $50/bale.
Have contracted 100 t PKE @ $330 per t landed. Equates to about 150-160 kg DM per cow. Mainly for summer and autumn use.
Plan to rear about 130 replacement heifers and 50 white face beef calves which will be sold to the beef block as weaners. Includes 7-8 t calf meal and $2000 for bedding and equipment.
|Young and drystock grazing
All yearlings are grazed on the support blocks from July until early May, but may return to the milking platform in the late spring early summer to help control surplus feed. Calves go to the support block at 2 weeks old and finished being reared there. They are wintered on the milking area as yearlings from June 1 and return to the support block in July when the cows come home.
The $8000 cost is for off farm grazing for 17 carry over cows. All yearlings are grazed on the support blocks from July until early May, but may return to the milking platform in the late spring early summer to help control surplus feed. Calves go to the support block at 2 weeks old and finished being reared there. They are wintered on the milking area as yearlings from June 1 and return to the support block in July when the cows come home.
|Fertiliser (incl. N)
This is net of fertiliser rebates. Includes 75-80 kg N per ha for the milking area. One application of Phased N (20-30 kg N/ha) is used in the early spring to follow the herd. The non effluent area of 124 ha gets another application, (approx 25 kg N per ha), in the spring and one in the autumn. Milking area non effluent block gets 340 kg per ha spring and autumn of fertiliser mix as per Balance recommendations, (contains biophos, MoP and DAP). Support block gets spring and autumn fertiliser including N. Due to the wet autumn and lower pasture cover in early June one round of nitrogen,(30kgN/ha), is being applied to the effluent areas in June. These areas usually do not get any N applied. This should not alter the total amount of N applied for the year as it is likely less may be applied later in the season.
|Regrassing & cropping
Pasture renovation is a regular part of the farming plan, mainly to repair any damage done in the spring and from mobbing in the summer heat. Any paddocks that are under performing will be regrassed as well, so the area renovated each year can vary. Undersowing is done by farm owner. Seed used is what ever is the recommended rye/white clover mix at the time. No cropping is done as soils are too wet. This cost is budgeted to be higher than usual this season as soil conditions going into the winter are much wetter than normal.
|Weed and pest
Attention is given to keeping the farm weed free so as much area as possible is available for grass to grow. Covers annual weed spray to control docks, buttercup and thistles on both the milking area and the support block.
|Vehicles & fuel
Have 2 tractors between the 2 farms and 2 two wheel motorbikes. No 4 wheelers used.
|R&M (land, buildings, plant, machinery)
Policy is to keep up to date with R & M so that in low payout years spending can be cut to a minimum. Having herringbone sheds means very little R and M needed on milking shed and plant. Have own mower and undersower but very little other machinery. This budget includes $6,000 for plant R and M, and $12,000 for cowshed plant.
|Freight and general farm expenses
Protective clothing, health and safety costs and bio security levy are included here.
Do all own administration, budgets, and payroll. Use accountants for tax advice.
Keep insurance cover to a minimum. Do not have business interruption cover.
A large portion of rates is paid to Environment BoP for flood protection. Rates now include extra rates to cover repairs and improvements to flood control in the region after the 2017 floods.
|TOTAL FARM WORKING EXPENSES||815,500||4.01||1,406||5,097|
|CASH OPERATING SURPLUS||885,300||4.35||1,526||5,533|
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 but are important to fully understand the efficiency of the farm business.
|Value of change in dairy livestock
Closing livestock numbers will be similar to opening.
Covers owners unpaid input of 0.3 FTE. The owners no longer relief milk but do milk when staff are on holiday, for herd testing, tail painting and to cover sick leave. This labour adjustment also covers all administration, strategic planning and governance.
|Feed inventory adjustment
Expect to have 20 t DM more on hand at the end of the season as less than usual was carried into the 2023 winter.
|Owned support block adjustment
53 ha of owned support land valued at a market rental equivalent of $750 per ha per year.
Based on 2021-22 actuals, and adjusted to allow for additions/sales to fixed assets in 2022-23. There are no significant farm asset purchases planned for 20-23. Farm has a low cost infrastructure and minimal machinery.
|DAIRY GROSS FARM REVENUE||1,700,300||8.36||2,932||10,627|
|DAIRY OPERATING EXPENSES||920,250||4.52||1,587||5,752|
|DAIRY OPERATING PROFIT||780,050||3.83||1,345||4,875|
|Milk Production (kgMS/ha)||1,500||1,384|
|Milk Production (kgMS/cow)||414||395|
|Net Dairy Cash Income ($/kgMS)||$7.74||$8.95|
|Total Farm Working Expenses ($/kgMS)||$2.62||$4.04|
|Cash Operating Surplus/Deficit ($/kgMS)||$5.12||$4.91|
|Gross Farm Revenue ($/kgMS)||$7.74||$9.01|
|Operating Expenses ($/kgMS)||$3.17||$4.50|
|Operating Profit ($/ha)||$6,865||$6,248|
*These KPI's are based on cash book actuals to 31 May 2021 and estimated non-cash adjustments. The final financial performance based on financial statements may differ.
Comments and other points of interest
|Milk Production (kgMS/ha)||1,344||1,423|
|Milk Production (kgMS/cow)||373||406|
|Net Dairy Cash Income ($/kgMS)||$6.22||$6.89|
|Total Farm Working Expenses ($/kgMS)||$2.38||$2.67|
|Cash Operating Surplus/Deficit ($/kgMS)||$3.84||$4.22|
|Gross Farm Revenue ($/kgMS)||$6.22||$7.15|
|Operating Expenses ($/kgMS)||$2.91||$3.17|
|Operating Profit ($/ha)||$4,452||$5,676|
*These KPI's are based on cash book actuals to 31 May 2020 and estimated non-cash adjustments. The final financial performance based on financial statements may differ.
Comments and other points of interest
Dry off date: 08/05/20.
Culls on hand: 13.
% Milking area regrassed: Nil. 5 ha done on support block due to effects of the drought.
N applied this autumn to date: 30 kg N per ha over the whole farm applied with autumn fertiliser.
Feed situation table
|Current situation||Target for 31/5/2020||Target for PSC|
|Stocking Rate||Equates to 3.7 445 MA Cows 55 R2 Heifers 180 R1 Heifers On milking platform||Equates to 3.6 Cows/heifers to support block June 1 180 yearlings wintered on milking area||Equates to 1.25 180 yearlings to support block and 200 cows home 10/7/20 at rate of about 200 per week|
|Body Condition Score||4.5||4.6||4.8-4.9|
|APC kg DM/ha||2100||2000||2500|
|Growth rates kg DM/ha/day||40||30||25-30|
|Supplements on hand||320kg DM/cow equivalent on hand 50 bales hay 50 bales baleage + two stacks at the runoff (170t pit silage) 180 bales of baleage at runoff||296kg DM/cow equivalent 50 bales hay on home farm two stacks at the runoff (170t pit silage) + 150 bales of baleage at runoff||159kg DM/cow equivalent 50 bales hay 80t silage 120 bales of baleage|
Actions taken to address the feed shortage
Plans to achieve target APC and BCS and PSC targets
Concerns and plans for the upcoming weeks
|Milk Production (kgMS/ha)||1,344||1,352|
|Milk Production (kgMS/cow)||373||382|
|Net Dairy Cash Income ($/kgMS)||$6.76||$6.73|
|Total Farm Working Expenses ($/kgMS)||$2.52||$2.51|
|Cash Operating Surplus/Deficit ($/kgMS)||$4.25||$4.22|
|Gross Farm Revenue ($/kgMS)||$6.99||$6.58|
|Operating Expenses ($/kgMS)||$3.09||$3.12|
|Operating Profit ($/ha)||$5,247||$4,677|
*These KPI's are based on cash book actuals to 31 May 2019 and estimated non-cash adjustments. The final financial performance based on financial statements may differ.
Comments and other points of interest
|Milk Production (kgMS/ha)||1,406||1,250|
|Milk Production (kgMS/cow)||391||347|
|Net Dairy Cash Income ($/kgMS)||$6.20||$6.89|
|Total Farm Working Expenses ($/kgMS)||$2.45||$2.64|
|Cash Operating Surplus/Deficit ($/kgMS)||$3.75||$4.25|
|Gross Farm Revenue ($/kgMS)||$5.73||$6.18|
|Operating Expenses ($/kgMS)||$2.97||$3.23|
|Operating Profit ($/ha)||$3,873||$3,686|
These KPI's are based on cash book actuals to the 31/5/2018 and estimated non-cash adjustments. The final financial performance based on financial statements may differ
Want to see how the top operators are spending their money? Are there areas for improvement in your own business where savings can be made? We’ve collected in-depth current season budgets from a number of top performing farms with a focus on lower ‘per unit’ cost of production to help you identify opportunities.
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