Budgeting, Dan and Kate King (West Coast)

View/download PDF of updated budget

Key Points

• Rainfall for the season has been more in line with average and has been well spread over the season with no more than 200 mm falling in any one month. 
• February and March were a little drier than average but the number of irrigation days needed for this summer was only 18 and never for longer than 3-4 days in a row.
• Pasture and crop harvested for the season is estimated to be 12 t DM/ha which is similar to the 22-23 season, (12.2 t DM/ha). Imported supplements fed for the season (to cows and young stock) equates to 2.4 t DM/ha. This is 0.6 t DM/ha more than last season.
  Production for the season should finish at about 72,700 kg MS, up 2% on budget.
• Operating profit for the season is estimated to be about $2,147/ha which is more than double the budget of $1,009/ha. Along with the slightly higher milk production, an 8% increase in milk price compared with budget, plus a 4.6% decrease in farm working expenses have contributed to the increase in budgeted operating profit.
• The farm is well set up for next season with pasture cover, cow condition and supplements on hand all at or above targets needed to ensure these targets at calving are met.
• Higher interest rates continue to impact cash flow however debt repayment has continued this past season.
  
  

Other points of interest

Farm working expenses are forecast to be about $4.21/kg MS, (about $15,000 or 5%, below budget) and operating expenses are expected to be about $5.64/kg MS.

Savings have come from

• Cheaper feed prices, in particular PKE which was budgeted at $430/t landed but then contracted for after June 2023 for $334/t landed. Average cost of PKE fed for the season is $352/t landed. 
• Cheaper than budgeted baleage making costs. Budget was for $60/bale and actual costs for baling and wrapping was $33/bale.
• Dropping 2 herd test early in the season when the pay-out drop was announced and missing the final season herd test as unable to find suitable dates.
• A 30% saving in fertiliser costs after revising the fertiliser programme to provide a more cost effective use of fertiliser. Two thirds of the paddocks were at optimum Olsen P so the amount of fertiliser used was reduced. 
  •    Not needing to use a $6,000 contingency included under freight and general farm costs.
  •    Not having any unforeseen issues with vehicles so coming in well under budget.
  Some cost overruns have occurred with
  •    The fertiliser spreader belt snapped which was an expensive repair job ($8,000), so R & M costs were more than double the budget.
• Regrassing and cropping were up, with a change in the cropping plan. Instead of putting the grazed winter crop area into permanent pasture in the spring, a catch crop of oats was planted and harvested for baleage and then millet were used to give better weed control. This resulted in two more lots of cultivation and seed planting.
• Grass grub and porina infestations required control which increased weed and pest costs.

Nitrogen use for the year is 105 kg N per ha, just slightly down on the budget of 110kg/n/ha.
Reproductive performance for the herd was slightly improved on the previous year with a six week in calf rate estimated at 71% and an empty rate of 9%.
The herd went to 16 hour milking late January and the once a day mid-April while still producing 1.5 kgMS/cow/day. All culls were off the farm by late April
There are currently still 123 cows milking and the feed budget indicates that the herd will be all dry by the end of May.  This could be brought forward if pasture growth slows significantly or it is likely to get wet, (to avoid having freshly dried off cows trying to lie down in mud).
The farm cover is currently 2,100 kgDM/ha and cow condition is good. There will be 84.5 t DM to take through to next season along with 4.0 ha of swedes for the winter.

• Have clear short, medium and long term goals
• Build a resilient farm system that delivers a low stress, profitable business that is enjoyable to manage
• Continue to be organised and update and analyse budgets regularly
• Budgets are prepared for at least 2 years and updated regularly as this helps with planning for tax and capital requirements
• Research with the bank manager what levels of debt they are comfortable with the business carrying and then use cash surpluses to increase off farm investments in the share market, rather than putting it all into debt repayment
• Focus on producing high per cow in order to dilute costs
• Continue to improve environmental outcomes for the farm by further investigating and trialing diverse pasture mixes to minimise input of fertilisers and use of sprays
• Network with peers to continue learn new farming and business ideas

• The dairy shed is a 20-a-side herringbone shed
• It is 1.1 km from the farm dairy shed to the furthest paddock
• 4.3 ha of farm is separated from the main milking area by a creek. This is usually used for young stock, (weaners and yearlings), and dry cows, but there is movement of stock and feed between both areas so it is all treated as effective milking area.
• Farm was originally fenced to give even paddock sizes so contour was not taken into account. While the farm is flat, there are some lower lying areas that pond in the wet and gate ways are not always in the best position.
• Many of the paddocks are long and narrow – 65 wide and 250-330 m long. Paddock sizes mean cows have 24 hours grazing in each paddock. Despite having gate ways on either side of the paddock a lot of pasture is wasted with cows having to go in and out of a paddock twice. The has been remedied by putting a race along the back so that paddocks can be entered from both ends.
• Extra water troughs have been added so every paddock has a trough at the front and back. This has improved pasture utilisation during wet periods and pasture intakes in summer.
• The races are narrow due to the size of the farm. This is not issue for farm vehicles but can cause problems when contractors arrive with big gear. Most of these can be solved by guiding contractors across paddocks to prevent any damage to gates etc.
• Along the exit race where the cows walk out after being milked there are a number of rectangle concrete feed troughs in a line where PKE is fed. It is on a concrete pad so it can be hosed down each day with the wash water flowing into the effluent tank. This is spread on crop paddocks before planting.
• Planned start of calving is 1st of August. The mean was 16 days from PSC for 2023.
• Drying off is usually in late May, (May 20th for 2024). Drying off decisions are based on calving date, cow condition and feed budget forecasts.
• All in-calf cows are wintered on the farm on 4.0 ha of swedes, plus pasture, hay, baleage and PKE. The MA cows are fed 9.5 kg DM/cow/day and R 2 heifers, 13.5kg DM/cow/day. The PKE is fed on trailers on the the crop area.
• 30 yearlings are grazed on farm.

Pasture management

• Regular feed budgeting is carried out all year along with use of the spring rotation planner at the appropriate time. Pasture cover is re-assessed every 7 days using a C-Dax pasture meter, and the data is used to update the feed budget.
• Analysis of the feed budget information is used to manage supplementary feeding levels and harvesting and cropping decisions.
• Post grazing topping or mowing in front of cows is avoided if at all possible. When the grass growth rates are really high, pasture monitoring is carried out more frequently - every 4 to 5 days - and surpluses are managed by taking regular, light cuts of baleage to maximize pasture quality.
• Residuals of 1600-1700kg DM are targeted to maintain pasture quality.

Imported feed

• 1350-1450 kg DM/cow of supplements are in the 2024-25 budget. Made up of 144 t DM PKE and 13.5 t DM hay/straw and 58 t DM baleage.
• About 950 kg DM/cow of PKE is budgeted to be fed to in-milk cows and through the winter to dry cows as well as to young stock as needed. The PKE is bought on contract. The budget is for $380/t landed.
• Hay is usually sourced from Canterbury, a total of about 130 bales at $90/bale landed.

Supplements

• Surplus pasture is harvested as wrapped bales of silage. About 250 bales,(50 t DM), is usually budgeted.

Cropping

• The 6 ha that was in winter crop will be planted in the spring with a multi graze mix of short rotation ryegrass (SRR), clover, plantain and chicory mix.
• For wintering in 2025, 4.0 ha of swedes will be sown late spring. This will be over 6.0 ha, with each paddock of crop having a portion left as pasture so when being fed the cows have access to a cleaner area for lying down.
• No summer crop will be sown for the 24-25 season. The time of feeding out clashes with time off farm for the summer holidays. So to makes feed management for relief staff less complicated any feed deficits will be filled with PKE and baleage.

Irrigation

• During the summer, for 6-8 weeks, in most seasons, it is significantly dry and the non irrigated areas burn off very quickly. Pasture growth on these areas are typically about 20 kg DM/h per day. The 27 ha of the farm under pivot irrigation will grow at about 50 kg DM per ha per day during this time. This usually provides enough pasture to meet the most of the farms feed requirements with some supplementation from baleage and PKE.
• Irrigation is used on average about 25-30 days each summer.
• Low river flow can impact the ability to irrigate, but this has happened only once in the last 15 years. (summer 2023).

Mating and reproduction

• The yearling heifers are run with the herd during mating. Mating lasts 11 weeks using 3 weeks of AB followed by 6 weeks with Jersey bulls and finished with 2 weeks of AB using short gestation length dairy breed semen.
• The majority of AB uses forward pack kiwi cross semen, although 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. 
• At risk cows are monitored post calving, (difficult calving or retained mebranes), these cows are metrichecked once or twice prior to mating and treated as appropriate, (no cows have needed treatment for the last 2 years).
• No anoestrous treatements are planned for the 2024-25 season.

Young stock

• 30 replacement heifers are reared each year
• Calves are reared on colostrum, whole milk, meal and pasture. Milk is fed ad lib for 4 weeks then twice a day for 3 weeks then once a day until weaned at 85 kg liveweight.
• They are grazed mainly on the 4.5 ha across the creek but do return to the main milking platform if necessary.

• Labour on the farm for 2024-25 is 1.4  of owner input assisted by 0.17 FTE from part time staff. This covers help over calving and regular weekends off plus allows for 4 lots of one week holidays to 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 text 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.
• 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.

Best practice

• Environmental best practice guidelines and resulting KPI's are understood for this this area, and this farm. It is a priority to continue to implement on-farm practices that deliver the best outcomes for the environment.
• Care is taken to ensure livestock and pasture management and the use of feed and fertiliser follow recommended best practice for the soil types.

Irrigation

• As there is no soil moisture monitoring equipment installed, irrigation decisions are based on weather forecasts. If there is no significant rain due within a week, irrigation will commence in the summer and will be stopped when the forecast indicates there will be significant within the next week. The pivot keeps up well so it is no issue to stop and start again if the rain does not eventuate.
• Applications are usually 10 mm per pass which is every 38 hours.

Fertiliser and nitrogen

• Fertiliser is applied as per fertiliser company recommendations and are in line with best practice guidelines for the region and soil types. Farm fertility is high with Olsen P levels in the range of 34-50.
• For the 2024-25 season comparisons of nutrient budget from 2 different fertiliser companies, along with other store costs and cartage will be done, to ensure the best use of money allocated for fertiliser.
• Nitrogen use is around 100-115 kg N/ha/year.
• All fertiliser is spread with own gear. Products used are Ammo31/36, Ureammopot, and a mix of Cropmaster DAP/Pot Chloride/Ammonium Sulphate.

Wintering practices

• Winter crop areas are carefully selected to ensure they minimise the risk of runoff. Cropping areas are selected to avoid river and road boundaries.
• Winter crop grazing best practice is followed to minimise soil and environmental impact and ensure good cow health and welfare.

Soil testing

• A whole farm soil test is done every 4-5 years. In between times a few paddocks are tested each year prior to cropping/regrassing.

Effluent

• Effluent is spread via a traveling irrigator, applied to 10% of the total farm area.
• A holding tank gravity feeds through an underground pipe out to a storage pond out in the paddock beside the cowshed. The effluent is gravity fed back the holding tank which has a floating pump on it which pumps it out to the travelling irrigator. This system is compliant with the council.

Riparian planting

• Stock are excluded from all creeks and. Broom and trees grow alongside the main creek. An ongoing spray programme is carried out to control/eradicate the broom.
• Shelter belt planting, (poplars) has been underway for 5 years, and there are plans to plant more this coming winter. Different tree species are being investigated including Italian Alder.

Overview

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:

• Revised our budget and communicated this with our bank
• Arranged to go interest only on our debt servicing as of next month, this will help protect our cash reserves so we won't need to go into overdraft
• Reviewed feed budgets and allocations of feed types to ensure best quality feeds are going to the milking herd
• We have reviewed our replacement rate and will reduce it from 22-25% down to the industry recommended optimum of 18%, this will save feed and animal health and rearing costs
• If the milk price drops significantly further, one partner has the option to work off-farm between milkings, which would reduce the need to take funds from the farm
• We are not keen on changing expenses too much as there is a risk that milk production will drop, and at this stage of the season it is important to maximise milk production.

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.

• Monitor growth rates and know your pasture covers so you can better budget feed allocation and nitrogen use.
• Use soil temperatures as part of your decision-making process for applying nitrogen so you can apply it when you will get a better response. Get your own soil thermometer if you can.
• Look at extended weather forecasts and adjust feeding out timings and allocations to avoid driving on pasture when it is really wet and allow for wastage due to the wet.

*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.

Click here for PDF of 2021-22 budget v actuals

Comments

• Rainfall to the end of December was 600 mm up on previous year, (90% of annual expected rainfall), so very wet start to season which impacted pasture utilisation, and pasture growth. Cows were underfed for 4-6 weeks in spring and despite additional supplements being fed there was a high incidence of clinical ketosis which impacted production.
• Rainfall for the latter half of the season was variable with January drier than usual and March extremely dry. A warm moist April contributed to a high incidence of late season eczema with 6% of the herd showing clinical signs of the disease.
• Despite the challenging weather conditions, production finished at 77,438 kg MS which was only 2% down on budget.
• Operating profit for the season is estimated to be about $3,200/ha which is 26% up on budget. A 13% increase in milk price compared with budget, plus careful management of the farm working expenses budget which limited increases in spending to only $0.25/kg MS have contributed to the increase in budgeted operating profit.

Other points of interest

• Pasture and crop harvested for the season is 9.6 t DM/ha which is 0.8 t DM/ha lower than the 2020-21 season.
• Number of irrigation days was 31 days, which was similar to previous years but instead of being in January and February it was in January and March.
• Early February saw 200+mm rain in a 24 hour period with flooding on part of farm over 2 wires, but minimal damage resulted and flooding cleared quickly so there was no impact on grazing rotation. This flooding event meant no irrigation in February, however March was particularly dry so irrigation was needed through March, which is a month later than usual.
• Feed supply was tight through January to April, with pasture covers only being maintained by feeding extra supplement. A total of 1.6 t DM/ cow was fed over the entire season, (440 kg DM/cow, or 36% higher than the 2020-21 season).
• A longer round, (30days early March to 42 days by late March), was key to protecting pasture cover through the autumn, with cover only getting as low as 1860 kg DM/ha in mid- March. With additional supplements used, pasture cover was over 2100 by late April and the farm was in an optimal growing state when better rainfall and warm temperatures in early May occurred. This resulted in the farm measuring growth rates in excess of 50kgDM/ha/day, so by May 18th pasture cover was just under 2500kg DM/ha. (The following week after several frosts, pasture growth rates had dropped to 15 kg DM/ha/day).
• End of May pasture cover on target at 2300 kgDM/ha and cow condition was 4.3. By late June BCS is now close to 5.0.
• The last culls left the farm May 7th. Culls went a bit earlier than usual as there was a high risk of getting caught with culls on hand going into June. 114 cows dried off May 26th which is similar to previous seasons.
• The 2021-22 budget included double the use of imported feed compared with previous years. In part, because lack of works space meant culls were carried into June so winter feed was impacted. The wet winter and spring plus higher forecast milk prices meant that when feed contracts were being set in July the decision was made to increase PKE contracted. At 371/t landed this has been profitable decision, given the final pay out and the challenging summer/early autumn pasture growth.
• N use 120 kg N/ha for the year – well down on budget of 180 kg N/ha as soil and weather conditions were seldom suitable for application.
• The winter swede crop grew well and had a yield of 20+ t DM/ha in late May.