Budgeting, High Input System (South Waikato)
16 min read
The success of this 75 ha, 290 cow, high input farm near Putaruru depends on skilled labour and the ability to evaluate and negotiate feed options. Focus on minimising waste, efficient resource use and strong financial management means this business is consistently in the top 10% for operating profit per ha for South Waikato Owners.
This high input, highly stocked farm, depends on effective feed monitoring, efficient effluent management and improving herd fertility for success.
Achieving success with a high input system requires skilled labour and an ability to evaluate and negotiate feed options. A contract milker is employed and the budget has been prepared showing the payment to the contract milker as wages paid, with all costs being the owners share only. The contract milker pays for labour, shed, power, and farm bikes.
The budget for 2023-24 is based on a net dairy Cash income of $8.52 which is $0.65/kgMS, (7%), lower than last seasons budget. This new seasons budget does shows a decrease in farm working expenses of about $0.32/kg MS, or 6%, on last season, largely due to a drop in feed prices. Ensuring all resources are still being used efficiently will again be key to maintaining a high level of profitability for this coming season.
Owner with contract milker
Near Putaruru, South Waikato
75ha effective milking platform, no support block
08/07/2023 MA cows (01/07/2023 R 2 heifers)
5 (> 31% imported feed)
134,900 kgMS/year, 1,800 kgMS/ha 465kgMS/cow
Production (last 3 years):
131,336 kgMS average
|Financial KPI 2023-24 budget|
|Net dairy cash
|Total farm working
|Dairy operating profit ($/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
Have a very profitable business based on a high input system that is implemented to a high standard.
Minimise waste, (in any form), from the system through application of good management of the system e.g. cows, (empty & losses), feed, minerals, pasture, effluent.
Have a system that consistently delivers excellent physical and financial KPI’s irrespective of season and pay out.
Deliver very good cost control, specifically around the use of basic, lower cost, feed inputs. Manage the budget to identify the minimum requirements to generating high production.
Analyse and benchmark the system to identify opportunities for improvement i.e. high profit will come from executing the current system well rather than chasing the ultimate system.
Continue to use surplus cash to strengthen the financial position of the business.
Farm policy and infrastructure
People, health and safety
|Net Milk Sales
Based on milk production for the year of 134900 kg MS @ $7.89per kgMS advance and deferred payments. Includes Fonterra dividend of $0.90 per share on 129,000 shares. Milk revenue is net of the DairyNZ levy 3.6 cents per kg MS.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
54 MA cows/Surplus R 2 heifers @819 and 210 bobby calves @ $26. Cow sales are a mix of culls and surplus in-calf heifers and in milk cows.
|Other Dairy Cash Income
Rent for surplus housing on the property.
|NET DAIRY CASH INCOME||1,148,750||8.52||3,961||15,317|
|Wages (incl. ACC)
This is payment to the contract milker and covers remuneration for 1.6 FTE plus some relief milking and allowances for calves reared. This also covers the contract milkers share of shed, power, farm bike and communication costs.
Covers teat spray, mastitis treatment, dry cow, teat seal,antibiotics, vaccinations , lameness, metabolic treatments and general vet costs.
|Breeding and herd improvement
Heifers mated to start calving a week earlier than mature cows. AB for 5.5 weeks. Budget covers 360 insemination's @ $14 /straw and $6.00 per insemination fee. Herd test 4 times per year one milking only. Six bulls will be leased, to use with the heifers and with the herd after AB is finished. Mating goes for 12 weeks.
Contract milker pays for farm dairy costs such as rubberware and detergent. This cost is for milking machine testing and sundry items that are the owners responsibility.
|Electricity (farm dairy, water supply)
Contract milker pays for the farm and shed electricity.
|Supplements made (incl. Contractors)
This is pit silage made on the milking platform. The amount varies each year depending on the spring growth. The budget is for 48 t DM pit silage, (12 ha at 4 t DM/ha) at $0.17 c/kg DM in the stack.
The budget is for 308 t PKE at $330/t landed, and approximately 315 t DM of maize silage at $458/ t DM in the stack. Also included is $12,500 for minerals which are added to the feed. The PKE is not contracted yet but the hope is that the landed price should actually come in around $310-315/t. There is high expectations that there will be some good deals regarding PKE contracts around field days time.
This covers 3-4 t of meal, shavings for bedding, de-horning and young calf animal health costs. Plan is to rear about 67replacement heifer calves.
|Young and drystock grazing
Calves leave the farm December 1st as weaners and return to the farm May 1st as in calf heifers. Prices are now $10.00 per head per week for 67 calves for 22 weeks and $14.00 per head per week for 67 yearling heifers for 52 weeks, (grazing for bulls during mating are included). This includes freight and all animal health including zinc and PKE fed at no extra charge.
|Fertiliser (incl. N)
This is net of $1,320 fertiliser rebates. 65% of the farm is irrigated with effluent. Over the whole year the effluent area gets an additional 90 kg N per ha applied and the non-effluent area gets 120 kg N per ha. Fertiliser applied is urea, PhasedN and sulphur depending on the time of year and the soil conditions. August and September fertiliser and nitrogen for the whole farm is now applied by helicopter, as is the autumn fertiliser for the non effluent area. This costs about $6,500. Contour and soil conditions in the late winter and early spring mean that a much better coverage can be achieved with the helicopter. The contour of the non effluent area is difficult to evenly spread fertiliser using land based spreaders so using a helicopter on this land gives more efficient use of fertiliser.
|Regrassing & cropping
No regrassing planned for the 2023-24 season.
|Weed and pest
Weeds are not a problem.
|Vehicles & fuel
Vehicle costs are low as only have to pay for the maintenance and running of 1 tractor, which was replaced in 2020-21. Feed pad and stacks are near the Dairy shed so the tractor is not running very much. The contract milker supplies and pays the running costs for farm bikes.
|R&M (land, buildings, plant, machinery)
The dairy shed, feed pad and effluent system are only seven years old and other infrastructure is in good order so R and M is relatively low.
|Freight and general farm expenses
Includes bio security levy of $0.024/kg MS
Covers accountancy, bank charges, and general office costs. This is lower than for an owner operator as the contract milker does a lot of the day to day organising so communication costs for the farm owner are low. Do own GST returns which keeps costs down.
This is significantly higher than last season due to insurance company premium price increases. The insurance on just the two farm houses has increased 20%.
No owner ACC paid.
As per current rates demand.
|TOTAL FARM WORKING EXPENSES||669,330||4.96||2,308||8,924|
|CASH OPERATING SURPLUS||479,420||3.55||1,653||6,392|
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 however to fully understand the efficiency of the farm business they are an important aspect.
|Value of change in dairy livestock
Expect to have on hand 31/5/2024, 3 more R 2 heifers, and 3 fewer MA cows. The value of the change in livestock on hand is based on the 2023 IRD NAMV. The total livestock income, (cash and non-cash) of $0.37/kgMS.
This covers about 2 part days per month on farm as well as governance and administration for the business,it equates to 0.1 FTE for the year of unpaid owner input.
|Feed inventory adjustment
The amount of supplement taken in to the 2024 winter is likely to be similar to the start of the season.
This is quite high as cowshed, feed pad and effluent systems are only 8 years old. It has been based on 2021-22 Financial statements plus some allowance for additional years depreciation. No major fixed asset purchase/sales are planned for the 2023-24 season.
|DAIRY GROSS FARM REVENUE||1,148,150||8.51||3,959||15,309|
|DAIRY OPERATING EXPENSES||737,830||5.47||2,544||9,838|
|DAIRY OPERATING PROFIT||410,320||3.04||1,415||5,471|
|Milk Production (kgMS/ha)||1800||1,771|
|Milk Production (kgMS/cow)||429||420|
|Net Dairy Cash Income ($/kgMS)||$7.30||$8.94|
|Total Farm Working Expenses ($/kgMS)||$4.29||$4.79|
|Cash Operating Surplus/Deficit ($/kgMS)||$3.01||$4.16|
|Gross Farm Revenue ($/kgMS)||$7.55||$9.61|
|Operating Expenses ($/kgMS)||$4.80||$5.27|
|Operating Profit ($/ha)||$4,955||$7,687|
*These KPI's are based on cash book actuals to 31 May 2022 and estimated non-cash adjustments. The final financial performance based on financial statements may differ.
Comments and other points of interest
|Milk Production (kgMS/ha)||1,695||1,713|
|Milk Production (kgMS/cow)||446||442|
|Net Dairy Cash Income ($/kgMS)||$7.09||$7.43|
|Total Farm Working Expenses ($/kgMS)||$3.93||$4.13|
|Cash Operating Surplus/Deficit ($/kgMS)||$3.16||$3.29|
|Gross Farm Revenue ($/kgMS)||$7.09||$7.38|
|Operating Expenses ($/kgMS)||$4.76||$5.01|
|Operating Profit ($/ha)||$3,954||$4,050|
*These KPI's are based on cash book actuals to 31 May 2020 and estimated non-cash adjustments. The final financial performance based on financial statements may differ.
Comments and other points of interest
% still milking: 89% (last 15 culls going 12 May).
Dry off date: Main herd about 20/05/20, 10-15 cows needing long acting DCT 11-12 May.
% Milking area regrassed: 8.6% of farm (6.5ha undersowed).
N applied this autumn to date: 32kg N/ha as phased over the whole farm applied last week in April, just prior to the last good rainfall.
Planned N application to end of month: 0
Feed situation table
|Current situation||Target for 31/5/2020||Target for PSC|
|Stocking Rate||4.17 heifers are back||3.96||3.96|
|Body Condition Score||4.3-4.4||4.4-4.55||5.0|
|APC kg DM/ha||2100||2400||2350|
|Growth rates kg DM/ha/day||50||35-40||20-25|
|Supplements on hand||274t DM maize||253t DM maize||214t DM maize|
Actions taken to address the feed shortage
Plans to achieve target APC and BCS and PSC targets
Concerns and plans for the upcoming weeks
|Milk Production (kgMS/ha)||1,704||1,624|
|Milk Production (kgMS/cow)||473||451|
|Net Dairy Cash Income ($/kgMS)||$7.01||$6.92|
|Total Farm Working Expenses ($/kgMS)||$3.94||$4.36|
|Cash Operating Surplus/Deficit ($/kgMS)||$3.07||$2.56|
|Gross Farm Revenue ($/kgMS)||$7.05||$7.15|
|Operating Expenses ($/kgMS)||$4.65||$4.98|
|Operating Profit ($/ha)||$4,090||$3,531|
*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
Other points of interest
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