Budgeting, Lower Northland (Don and Kirsten Watson)
13 min read
Don and Kirsten Watson farm one hour north west of Auckland on the South Kaipara Head peninsula. The 112 ha effective milking platform is supported by a 150 ha leased block. They aim to maximise profit by improving pasture grown and using a split calving system to better utilise the increased feed grown. They anticipate a 7.5% increase in production this season, focusing on better autumn cow feeding and improved quality of silage. All non-replacement calves are reared and sold as dairy beef or herd bulls which contributes to livestock income of over $1,500/ha. Their management vision is centered on rapid equity growth to achieve financial independence and personal fulfillment. Sound financial management ensures cash flow is managed efficiently and financial decisions are made proactively.
Don and Kirsten Watson are in their 7th season of farm ownership on this farm on the southern peninsula of the Kaipara harbour, about one hour North West of Auckland.
Their focus is to continue to maximise profit by increasing pasture grown and harvested through an ongoing pasture renewal programme, good management of existing Kikuyu and using a split calving system to better match pasture supply and demand.
Production is budgeted to be up 7.5% on last season as there is more focus on feeding the autumn cows better and making earlier and better quality silage.
To maximise the use of the extensive lease block the majority of all non-replacement calves are reared and sold as dairy beef or herd bulls. This contributes to a stock income for the farm over $1,500/ha, ($1.25/kg MS).
South Kaipara Head, Helensville, North West Auckland
112 ha effective milking platform
Farm size (for dry stock and dairy beef):
supported by 150 ha lease block
290 JX split calving
28/7/2022 spring, 15/3/2023 Autumn, (heifers 7 days earlier)
4 (20-30% feed imported)
140,000 kg MS/year budgeted, 1,250kg MS/ha, 483 kg MS/cow
Production (last 2 years):
122,300 kg MS average
How has the season been so far?
October 27th, 2023
What are cash flow forecasts looking like? How will a drought impact this?
Has the NIWA El Nino forecast changed how you are approaching this summer?
What strategies do you have this season for when a drought comes early, late, or is prolonged?
De-stocking early because of the wet autumn and winter means that we will be going into the summer with a lower stocking rate so should be able to take a higher pasture cover into the summer.
|Financial KPI 2023-2024 budget|
|Net dairy cash
|Total farm working
|Dairy operating profit ($/ha)|
|Physical KPI 2022-23 est|
|Pasture and crop
surplus (kg N/ha/yr)
in-calf rate (%)
Strategy and financial
Farm policy and infrastructure
People, health and safety
Budget revision following milk payout drop
August 15th, 2023
We are just over two weeks in to calving with the spring herd and finishing mating with the autumn herd, so things are very busy on farm at present. We haven’t had time to look at our budget in great detail. That said, we have updated the Fonterra milk price and have lost over $100,000 income out of the budget. Our focus is to:
Concentrate on what we can control, such as feed allocation, to ensure spring production is optimised
Reduce spending on lime and R & M, which we are able to do because there has been a high level of expenditure in these areas in the past couple of years
Discuss any on-farm management changes properly with staff and explain why we are having to make changes.
What advice would you give to farmers who are either first time sharemilking or farm owners?
Communicate with your banker and maintain a good relationship.
Limit all unnecessary expenses.
Do your best to ride it out, things will improve.
What words of positivity would you give to farmers planning for the coming months ahead?
"Stick to your knitting", and focus on getting the basics right.
If you have a good equity level and haven’t yet invested, now is a good time to look at your future options, as there could be some good opportunities out there.
Do you have any tips and tricks for looking after your people on farm?
Maintain a positive workplace despite the bleaker outlook. It doesn’t really affect staff financially, so don’t make your problems theirs.
|Net Milk Sales
Milk revenue is based on 140,000 kg MS for the 2023-24 season at a milk price of $8.42/kg MS including advance, deferred on 130,600 kg MS and the winter milk premium. The Fonterra dividend is based on $0.57/share on an average of 135,000 shares. *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
Includes 61 cull MA cows and R 2 heifers @ $812/head, 10 autumn 2022 born steers and heifers @ $875, 38 spring 2022 born steers and heifers @ $770/head, 56 2023 autumn born steers, bulls and beef heifers @ $600/head, 80 beef R 1 2023 spring born steers and beef heifers @ $600/head, 4 Angus composite heifers, (ex embryo transfer programme), 2022 born @ $1,800, and 3 MA bulls @ $1,800/head. Net stock income is net of industry levies, yard fees and commissions.
|Other Dairy Cash Income
Rent for surplus farm house
|NET DAIRY CASH INCOME||1,459,300||10.42||5,032||13,029|
This covers one full time permanent employee and includes allowance for housing as employee has own house.
The animal health focus is on good observation, prevention and early treatment if required. Cu and Se are administered through the water during calving and mating using a dosatron system. Liver and blood sample analysis shows that this is sufficient to maintain acceptable levels. Best practice is followed to ensure good udder health and good quality milk is produced. The goal is to maintain a SCC of under 100000.
|Breeding and herd improvement
Mating is 9 weeks for the autumn herd and 10-11 weeks for the spring herd. AB is used for 3 weeks for both herds. The highest genetic merit cows and all the yearlings are mated to AB. For the 2023 season sexed semen will be to reduce the number of cows needed to be mated to generate enough replacements. The lower genetic merit cows are naturally mated with Angus composite cross bulls, (Angus/Simmental/Gelbvie). After AB is finished 2 teams of 2 bulls are run with the herd and 2 bulls are run with the heifers. No Angus composite cross bull embryo transfer will be done this year as there are sufficient bulls on hand. It will be carried out again in the 2024-25 season matings. Herd testing is carried out 4 times a year one milking per test.
This covers consumables such as detergents, rubberware, filter socks etc.
|Electricity(farm dairy, water supply)
The shed is a 32 bail rotary and is operational 365 days per year as the farm is split calving.
|Supplements made(incl. Contractors)
This covers supplements made on both the milking area and the support block and the growing and harvesting of maize on the support block. The maize to be grown this year on the support block is estimated to cost $0.25/kg DM including regrassing into permanent pasture. About 16 ha will be planted using a mix of earlier and later maturing varieties to stagger harvesting and to provide some feed earlier in late summer autumn. This should yield 350 t DM of maize silage. Another 5 ha will be planted in a grain variety, and should yield about 60 t DM of grain which will be kibbled. Supplements made are budgeted at 270 bales, (270 kg bales), of baleage at $55/bale and 40 t DM of pasture silage @ $0.20/kgDM.
The budget is for about 281 t of PKE/30% molasses blend for the year for an average price $438/t DM landed, (inlcudes $50/t freight). 85 t has been purcased for June and July @ $455/t landed, 168 t has been contracted for $407/t landed. Another 56 t at $400/t landed has been added to the budget for contingency in case of a very dry summer. The majority of this will be used for milking cows, though a small amount may be used at the support block for young stock. This product has been chosen to provide a higher energy feed to counter the low ME of the kikuyu in cows diet, particularly in the autumn.
The majority of calves are reared to weaning, including about 80 replacement heifers and 170-190 dairy bulls, beef heifers and steers. This cost includes about 2.0 t calf milk replacer and 9-10 t DM of calf meal, (pellets and kibbled maize). This cost also includes about $2,200 for vet costs and $5,000 for equipment and bedding.
|Support block lease
A 150 ha support block is leased across the road from the milking platform. This is made up of about 30 ha that is deer fenced and is in good pasture. This is where the maize is grown. The balance is hilly, poorer pasture and is often invaded by wild deer from the neighbouring forestry block. 40 ha of flat pasture was under water for 3 weeks after cyclone Gabriel. It has been too wet since to regrass so this area is currently under performing.
Fertiliser applied is as per recommendations based on soil tests. Applications of P and K applied to the sandy loan soils, on the milking area, (15% of the farm area), are reduced this year as this area is now all under effluent irrigation. The marine clay soils have high inherent nutrient levels that do not vary much each year. They have low nutrient requirements so only lime and nitrogen are applied to these soils, (85% of the farm area). Nitrogen applied to the milking area for the year will be about 85-90 kg N/ha. Sources of N are SustaiN and DAP depending on what is cheapest at the time. Cartage is included in this cost. Application is done using own spreader. The budget includes allocation for about 22 t Lime. Also in the budget is allocation for $5,000 for organic fish/seaweed/humates. This is applied to pasture that has newer species of red clover, fescue and chicory, and is tailored to promote clover growth. N use on these areas will be halved to about 40-50 kg N/ha. The budget does allow for more nitrogen to be applied to silage paddocks to boost yields.
|Regrassing & cropping
Includes $18,000 for sowing 12 ha of chicory and clover and 8 ha of turnips. The chicory area is sown in annual rye grass for winter feed and resown in turnips the following spring and then sown in permanent pasture in the autumn, (fescue, chicory and white and red clover mix). This means in any one year there are 18-20 ha of the milking area planted in summer crop. The kikuyu dominant pasture, (about 90 ha), is mulched in the autumn and undersown with a tetraploid hybrid ryegrass. Allocation of about $10,000 is for regrassing flood damaged areas of the support block in the spring, (if the soil is dry enough).
|Weed and pest
Includes chemicals for general farm weed and pest control, (rats and mice around maize silage), and equipment and supplies for deterrent of birds and deer.
|Vehicles & fuel
Fuel budget is about $33,000. This is quite high as supplements are fed out year round. The farm is over 20 km from the nearest service centre which also adds to to fuel costs. The extensive support block also adds to the vehicle running costs.
|R&M(land, buildings, plant, machinery)
R and M expenditure has been high for the last 6 years so the plan for this season is to only do minor works like fencing repairs that do not cost too much and can be done in house and with second hand or existing materials on farm. Includes about $18,000 for plant and machinery maintenance, $17,000 for drainage and $5,000 for track repairs.
|Freight and general farm expenses
Includes bio-security levy of $2,800, protective clothing and general freight costs.
Do own GST and payroll. Includes accountancy, communication costs, subscriptions and staff costs, (tea/coffee/biscuits etc).
Farm insurance to cover buildings, plant, vehicles, business interruption and lost milk and liability
As per latest rates notices. Covers the support block as well.
|TOTAL FARM WORKING EXPENSES||790,360||5.65||2,725||7,057|
|CASH OPERATING SURPLUS||668,940||4.78||2,307||5,973|
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 similar numbers of stock on hand at the end of the season.
The unpaid labour input by the business owners is 1.5 FTE.
|Feed inventory adjustment
Expect to have no significant change in supplements on hand at the end of the season. Aim to take 230 t DM of maize and 55 t DM of silage into the winter next season again.
As per the 2021-22 financial statements plus allowance for 2 more years depreciation and some asset purchases and sales.
|DAIRY GROSS FARM REVENUE||1,459,300||10.42||5,032||13,029|
|DAIRY OPERATING EXPENSES||975,360||6.97||3,363||8,709|
|DAIRY OPERATING PROFIT||483,940||3.46||1,669||4,321|
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.
22 min read
5 min read
6 min read
13 min read
6 min read