Budgeting, Dan and Kate King (West Coast)
13 min read
Dan and Kate King run a family farm near Reefton, Buller district, focusing on getting the most milk production from each cow at low costs. Their farm is 74 ha with 155 Friesian cross cows and all young stock on farm. The farm has about 30% of the area under pivot irrigation. With changing weather, they're adopting a cautious approach for resilience. Their management decisions include having clear goals, maintaining a low-stress profitable farm, updating budgets, and networking with peers for new ideas.
Dan and Kate King run a small family farming operation near Reefton in the Buller district, with a focus on high production per cow from low costs of production. They enjoy trying new ideas and their biggest challenge is managing the wet periods.
The 2023-24 season budget and farm plan is a work in progress and many iterations will occur as the season unfolds. The aim is to be up to date with the farm financial situation and be clear what the implications will be if the milk price changes or the cost of inputs suddenly change so adjustments can be made. The budget at present shows the business can survive at a lower payout.
The new normal with the ongoing changes to the weather pattern seems to be wetter springs and prolonged summer dry periods so Dan and Kate have developed a conservative farm system that will ensure the farm and finances, (and people), remain resilient.
Reefton, Buller district
74 ha effective milking platform
Farm size (inclusion):
4.3 ha across a creek mainly used for young stock and some dry cow grazing
155 Friesian cross
2.5 cows equivalents/ha including all young stock on farm
70,000kg kgMS/year, (Budget 23-24, 959 kgMS/ha, 458 kgMS/cow
Production: (3 year average)
944 kgMS/ha and 453kgMS/cow
4 (21-30% feed imported) for 2023-24
All MA cows and in-calf heifers are wintered on the farm
27 ha, (37% of the total effective farm area of 74 ha), is irrigated with a centre pivot irrigation system
Ikamatua silt loam
Managing our budgets well in the good years means we are set up for the bad. We are in a better position to ride out this downturn, which could last for more than a year or two. Lower debt, good current cash reserves, a history of tight control on expenditure, and regularly taking time out from farming to have fun without spending money give us the confidence to face this current situation. Things we have done already or considered are:
What advice would you give to farmers who are either first time sharemilking or farm owners?
Taking control by updating your budgets, knowing your numbers and asking for help can give you a lot of peace of mind.
The industry has lots of support networks so, don’t be afraid to ask for help. Don’t let financial pressures affect your mental health.
What words of positivity would you give to farmers planning for the coming months ahead?
You and your family are number one in your business so look for strategies that keep you all well, happy, and safe.
Get all the information you can for your farm and use it to be more efficient with using your resources.
|Financial KPI 2023-24 budget|
|Net dairy cash
|Total farm working
|Dairy operating profit ($/ha)|
|Physical KPI 2021-22|
|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
Mating and reproduction
People, health and safety
Labour on the farm for 2021-22 is 1.2 of owner input assisted by part time staff from June to September, (35 hours per week), and 4 weeks of contract relief work between January and April to allow for 4 lots of one week holidays can be taken off farm.
All casual staff are employed under a signed employment contract and are given health and safety sheets printed off from the Work Safe website. These papers include all information that details how to perform their farm duties safely. These are read and discussed with the employee and each page signed by the employee once they fully understand the hazards relating to each farm task eg stock handling, tractor driving, riding a quad bike, milking etc.
A very simple system for health and safety is maintained that is based on a culture of having good practices carried out daily so paperwork is done regularly and records are always up to date. This eliminates the need for onerous amounts of time to complete documentation.
There is good signage at the farm entrance that is easily seen on entry. Posters and protocols are displayed on the cowshed wall and visitors are to follow instructions: Be inducted, sign in confirming that an induction processes has been given. Contact numbers for the farm owners are displayed so visitors can contact them at any time. Visitors are met, advised of hazards using the farm hazard map, they must then sign the farm hazards book and are required to follow all farm health and safety procedures during their visit.
If not seen to leave the farm, visitors must txt or call the owner to advise that they have departed. The data sheet and chemical information sheet is kept in a folder, along with the visitor sign in book in a letter box by the cowshed
Casual relief milkers have always been employed since purchasing the farm 8 seasons ago. They generally assist with afternoon milking as needed but are trained to be able to look after the farm by themselves so that the owners can take time away.
Innovative ways have been found to have "time off" at home with the local community by organising picnic days/activity days which are a lot of fun.
Fertiliser and nitrogen
|Net Milk Sales
The budget is prepared on an advance milk price of $6.50 per kg MS for 70,970 kg MS plus deferred income of about $0.86/ kg MS. The assumption is that the majority of the seasons total milk price will be paid out by the end of May. This estimated milk income received is about $1.00 per kg MS lower than the expected final for 2022-23 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
Based on the sale of 37 cull cows and R2 heifers @ $480/head, 100 bobby calves @$30/head, 8-9 bulls @ $1,180-1,320/head less the purchase of 8-9 bulls @ $1,700-1,900/head.
|Other Dairy Cash Income
|NET DAIRY CASH INCOME||515,350||7.26||3,325||6,964|
Permanent part time staff for 48 weeks for 16 hours per week. Equates to .32 FTE.
Animal health philosophy is to be very observant, keep good records and be pro-active, with much of the costs being for preventative rather than remedial treatments. Mineral supplements are provided via inline water supplementation, cows are metrichecked prior to mating and treated as appropriate. The average SCC average is under 150,000. In-calf heifers are teat sealed in June. Includes pregnancy testing for the herd.
|Breeding and herd improvement
This covers 3 weeks of AB using premier sires for the majority of the herd and yearling heifers. Lower PW/BW cows will be mated to short gestation beef semen in the first week of AB and then short gestation dairy semen for the remaining 2 weeks. 8-9 Jersey bulls will be purchased to run with the herd and the heifers for 6 weeks. The bulls will be removed on January 1st and 2 weeks of AB using short gestation length semen will follow. No anoestous treatments are planned for the 2023-24 season. Herd testing is done 4 times a year.
Covers all rubberware, detergents and consumables and milking machine testing for the 20 a-side herringbone shed. Standard recommended cleaning procedures are used.
|Electricity(farm dairy, water supply)
The plan is to go to 3 milkings in 2 days when the cows get to 1.8 MS/cow/day in late January and then OAD at 1.5 MS/cow/day in April, but the timing is weather dependent.
|Supplements made(incl. Contractors)
The budget is for contractors make about 200 bales of silage, (400 t DM), baling and wrapping only, (about $60/bale).
Includes $73,800 for PKE, (171 t @ $430/t landed), this is yet to be contracted. $15,500 has been allocated for 130-140 large bales of hay for use during the winter at $115-120 per bale landed.
35-40 replacement heifers will be reared this season. Calves are reared on colostrum, whole milk, meal and pasture. Calves are weaned off milk at 85 kg and get 1 kg/calf per day of meal plus good quality fresh pasture, then weaned off meal at 120 kg. Costs include meal and equipment.
|Young and drystock grazing
36 yearlings and 7 carry over cows will be on farm all year.
Cows and in calf heifers are all wintered on the 74 ha platform.
This is net of fertiliser rebates. Fertiliser is applied as per fertiliser company recommendations and are in line with best practice guidelines for the region and soil types. Per ha recommended nutrients for 21-22 are 181 kg N, 36 kg P, 64 kg K and 72 kg S. All fertiliser is spread with own gear. Products used are Ammo31/36, Ureammopot, and a mix of Cropmaster DAP/Pot Chloride/Ammonium Sulphate. Farm fertility is high, (Olsen P are in the range of 34-50), so there is cope to reduce fertiliser inputs if milk price drops too much.
Irrigation is used for about 6 weeks each year between January and March. Cost is for electricity for pumping water from the nearby creek and running the centre pivot irrigation.
|Regrassing & cropping
This cost allows for 3.6 ha winter crop, (swedes) to be planted late spring, and the regrassing of the previous winter crop area, (3.6 ha), in spring. In addition there is a 5 ha area, which was planted the previous autumn in a winter multi graze mix, (annual rye grass, triticale and crimson clover), which will be also be regrassed in the spring. Both areas, (total of 8.6 ha), will be sown in a summer multi graze mix, (direct drilled) The summer multi graze mix likely to be used is millet, crimson clover, chicory and raphno brassica. The 5.0 ha of summer crop area will be replanted in a winter multi graze mix again in the autumn, and 3.6 ha will be sown in permanent pasture. This cost includes any weed and pest control for the crops.
|Weed and pest
Pasture weed control is mainly spot spraying scotch thistles and ragwort. No chemical will need to be purhcased this season as there is plenty still on hand.
|Vehicles & fuel
Vehicles and machinery are kept clean and maintained regularly. Includes $14,300 for fuel. Care is taken to minimise damage, tractor hours per year are medium to low. Feeding PKE takes 5-10 minutes per day.
|R&M(land, buildings, plant, machinery)
Farm buildings and infrastructure are in very good order so very little maintenance is planned for 2023-24. Includes $3,000 for fencing and $3,600 for plant and machinery repairs and maintenance.
|Freight and general farm expenses
Includes dog related expenses, protective clothing, general freight and bio-security levy. A contingency allowance of $6,000, (about $0.08/kgMS), is also included here.
Do all own GST, pay roll and budgeting. Includes accountant's fees, computer consumables, subscriptions and communications costs.
This has increased on the previous year. The farms insurance cover is reviewed regularly to ensure it continues to be relevant and cost effective.
Similar to last year.
As per rates demand.
|TOTAL FARM WORKING EXPENSES||320,700||4.52||2,069||4,334|
|CASH OPERATING SURPLUS||194,650||2.74||1,256||2,630|
Non-cash adjustments have been included below the cash analysis to enable fairer comparisons to be made between farms. These adjustments are not part of a cash budget but are important to fully understand the efficiency of the farm business.
|Value of change in Dairy livestock
Expect to have about 5 fewer MA cows and in calf heifers at the end of the season. 2022 IRD NAMV used to value the change in livestock numbers.
This is for 1.2 Full time equivalent unpaid shareholder input.
|Feed inventory adjustment
Expect to have no significant change in feed on hand for the year.
Based on the previous years depreciation and adjusted for subsequent planned asset purchases and sales.
|DAIRY GROSS FARM REVENUE||507,350||7.15||3,273||6,856|
|DAIRY OPERATING EXPENSES||432,700||6.10||2,792||5,847|
|DAIRY OPERATING PROFIT||74,650||1.05||482||1,009|
|Milk Production (kgMS/ha)||963||944|
|Milk Production (kgMS/cow)||465||456|
|Net Dairy Cash Income ($/kgMS)||$8.59||$9.93|
|Total Farm Working Expenses ($/kgMS)||$4.45||$4.70|
|Cash Operating Surplus/Deficit ($/kgMS)||$4.14||$5.23|
|Gross Farm Revenue ($/kgMS)||$8.53||$9.63|
|Operating Expenses ($/kgMS)||$5.92||$6.25|
|Operating Profit ($/ha)||$2,517||$3,187|
*These KPI's are based on cash book actuals to 31 May 2022 and estimated non-cash adjustments. The final financial performance based on financial statements may differ.
Comments and other points of interest
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