Budgeting, Justin and Melissa Slattery (East Waikato)

October 23rd, 2023

• The season has been wet with slow pasture growth which is not the best for early calving. All stored supplement was fed out through the spring.
• Production compared with budget is 6% down.
• Rainfall to date (since June 1st) compared with average, as per Paeroa Weather station is 8% up for the season to the end of September, however June rainfall was double the average and on the back of a wet summer made the winter and early spring difficult.
• Pasture cover is finally where we want it at about 2400 kgDM/ha.
• Feed to be used at the new shed with in shed feeding was fixed early in the season so at this stage the imported feed costs are unchanged.
• N use similar to budget.

• The cash flow is looking better now with a $0.50/kgMS lift.
• There was a cash flow pinch that was manged through careful allocation of funds in and out.
• We have had an additional one off drain cleaning bull of $12,000 due to the extra wet winter and the need to clear clogged drains.
• The budget already has some contingency already built in to cope with a drought. How impacted really depends on how long and how bad the drought is.
• Milksolids produced would be lower than budget, and some costs may increase. For example, if it is really bad, regrassing costs might go up and off farm grazing for heifers could be higher.

• We have increased our cropping area to 12%, (from 8.5%), but a dry summer is not the only factor to influence that. Pasture performance is a contributor to this decision, plus, with the new farm next door, we need to increase the amount of maize silage to carry through for next year and have decided to plant a bit more than the original budget.
• We have tweaked our cropping plan based on advice from our agronomist.
• We usually start feeding the fodder beet before it is fully matured. However, our agronomist has calculated that we are best to plant a paddock of turnips as an earlier maturing and cheaper alternative for feeding out in Jan feeding. The fodder beet can then be started in February when it is more mature. This saves some cost as turnips are much cheaper to plant than fodder beet.
• Every 8-10 years we have a drought. Having this area cropped gets us through a 3 month drought.

Comes early
Monitor feed supply and utilise once a day milking and then early culling to try to balance feed demand with supply. The aim is to try to keep as many cows milking as possible so if the drought breaks early and pasture growth increases there are still enough animals on farm to take through to the late autumn.

Comes late
If a dry spell is later then the herd will be milked on twice a day for longer and culling may be delayed.

Is prolonged
If there is a prolonged drought, the plan would be to go once a day early, cull empties as early as possible and try to keep heifers off the farm for longer, or wintered off so that the pasture cover and cow condition for the next season is not compromised.
The current budget does include $20,000 to purchase silage to extend the crops if needs be. This is an early March decision and coincides with trying to keep the in calf heifers off beyond May. The aim is to extend the grazing of crops eaten until rain comes to protect undersowing and pasture cover for late lactation.

• Vision
  Aim to be leaders in the area for both profitability and reduced environmental footprint.
  Utilise the opportunities that we have, respect them, and be proud of the work we do.
  Look to continuously improve our farm and practices, keeping a long term view.
• Financial management
  Prepare a budget annually. The annual budget is treated as a live document, where adjustments are frequently made from changes in the season and prices.
  Be flexible to adapt and move to make the most of our situation and opportunities.
  Review the budget, but focus on the longer term impact of decisions.
  Any cash surplus is used to pay down debt.
  Financing facilities are reviewed yearly, to ensure they are sufficient to meet the forecast needs for the year. This means better financing costs can be negotiated.
• Benchmark
  Use industry analysis and benchmarking tools like DairyBase, to measure progress and identify opportunities for improvement.
• Networking
  Engage with other professionals and like minded farmers to continue learning, share ideas and help promote good environmental outcomes on farm.
  Being members of the Dairy Environment Leaders group is an example of this.
• Environment
  Achieving a high standard of environmental outcomes is important for the farm.
  Attention is given to improving environmental metrics as well as the external environment of the farm.

• Environmental metrics
  Purchased N surplus has reduced by over 30% and Biological greenhouse gasses have dropped by 12% since it was first measured and reported in 2019-20. The aim is to continue this downward trend through being even more efficient with use of resources.
• Fertiliser
  On the original 100 ha, Olsen P levels range from 28-72 and pH levels are 5.9-6.3. The new farm is still awaiting soil test results.
  Fertiliser applications are tailored for different management blocks to match plant requirements and minimise losses.
  Farm spreaders are calibrated regularly to check spreading width and volume. The plan is to eventually have GPS precision capability added to spreaders for more efficient use of fertiliser.
  Focus is on increasing clover performance so that nitrogen applications can be reduced. Nitrogen applications will likely be under 120 kg N/ha/year over 5 applications, but are dependent on soil moisture and pasture cover.
  Product used varies on the time of year and expected rainfall. This spring one application will be in liquid form with progib and sulphur, which has a quicker uptake, so a lower application rate can be used.
• Water use
  Water supply is from ground water via a bore. The water is high in iron so undergoes filtration before being used on farm.
  Efficient water use is important to the business, so a water meter is installed, with an alert connected to an app on the phone. Water use is 7 l/litre of milk produced.
  Total water extraction and farm dairy water use is reported to the Waikato Regional council six monthly. 
• Effluent management and use
  Effluent can be irrigated on to about 40% of the farm.
  Work has been done to ensure runoff and sediment from races is directed away from waterways and onto adjacent pastures.
• Shelter and riparian planting
  Vulnerable areas of the farm have been identified and are part of a programme of work to be retired and planted in trees or riparian plantings, as time and funds allow.
  Six years ago there were no shade trees of shelter on the farm, there are now over 70 shade trees, with plans to plant more, and there is now focus on planting native shelter belts.
  The shade trees planted are: pin oaks, red oak, London plane trees and magnolias. 
  Work is underway to progress the planting some native shelter belts using a mix of cabbage trees, ribbonwood, pittosporum, kanuka and some flax.
  About $2,000-$3,000 is spent each year on trees, which have had a 95% success rate for establishment. 
• Waterways
  All drains and waterways are fenced. There are plans to plant carex along main waterways to improve shade and reduce sediment runoff. 

• The farm aims to operate a system 3 production system, the aim of having less than 2 t DM/ha of imported feed. Pasture harvested in 2021/22 was 11.9t DM/ha.
• The business now has 2 farms with two herds run through 2 dairy sheds; 300 cows through a 28 aside herringbone and 235 through a 22 a side herringbone.
• Imported feed is fed in shed, (both sheds have in shed feeders). The maize and silage is fed in paddock on the original farm and on a small concrete pad in troughs on the new farm.
• About 11% of the farm is cropped.
• Achieving target pasture covers and cow body condition scores at critical times is key to the success of the business, and drive decisions around supplementary feeding, once a day milking, culling and drying off.
• The dairy sheds are under 0.8 km from the most distant paddock.
• The farm is well raced and fenced and has good water supply to each paddock.
• Young stock are grazed off farm from weaning until 22 months of age.  Live weights are monitored and actions taken to ensure target live weights are achieved.

• Pasture management
  Pasture cover is monitored frequently all year round and used for regular feed budgeting. This is key to ensuring efficient use of pasture grown and supplements used.
  The spring rotation planner is used through calving and into the early spring.
  PKE blend is fed along with maize silage all spring. The front end loader is fitted with scales so it is easy to accurately measure the wight for feed allocation.
  Supplementation is gradually reduced in late spring and stops once residuals can be maintained at 1500 kg DM/ha without adding in extra feed.
  Spring surpluses are usually managed by taking paddocks out for cropping so little surplus is harvested as silage.
  10-11% of the farm is regrassed each year following cropping.
  The farm operates a zero-pasture damage policy during the winter. Extra large grazing breaks are used at times in wet conditions, and, in periods of extreme wet stock will be stood off on the dairy shed yards if necessary.
• Supplements purchased
  Imported feed is a PKE, DDG, Tapioca blend. About 620 kg DM/cow is imported,(1.9 t DM/ha). In shed feeding minimises wastage and allows for more efficient use of feed.
• Cropping
  The plan for 2023-24 is to grow about 15 ha maize and 4.5 ha of fodder beet.
  The fodder beet is planted in September using conventional cultivation and planting methods. Feeding starts in mid-January to slowly introduce the crop into the cow’s diet. The aim is to be at maximum fodder beet intakes by mid-February when it is usually getting very dry. The crop should last till mid-April and is regrassed late April, early May. The average crop yield is estimated to be about 20 t DM/ha.
  The maize is planted following conventional tillage methods. Harvesting is usually early March. Yields are around 20 t DM/ha.
• Supplements made
  Very little supplement is made, at most about 10 ha or 25 t DM as wrapped baleage.

• Breeding and herd testing policy
  Mating consists of 4 weeks of AB with premier sires followed by 8 weeks with bulls. 24 Jersey bulls will be purchased, 5 yearlings to run with 129 replacement heifers and 19 R 2 bulls to run with the cows. As there are 2 herds the bulls will be split into 4 teams, and 2 teams rotated with each herd.
  Herd testing for the year is 3 tests, (over 2 milkings unless on once a day).
• Animal health
  The approach to animal health is to be proactive and vigilant.
  Mg supplementation to the herd is carried out in winter and late spring.
  Cu levels as per liver tests are normal so supplementation is not required at present.
  Zinc supplementation is carried out summer and autumn based on spore count levels for the area published by the vets.
  Lameness is not an issue on the farm.
  Mastitis management is based on industry recommended guidelines.
  Wastage is about 3% deaths and under 10% empties.
• Young stock policy
  Calves are reared on colostrum/wholemilk twice a day plus meal and hay. They are weaned off meal at 100 kg at about 10 weeks old.

• The overarching employment philosophy is to be an employer of choice.
• The farm is currently operating with one full time staff member to assist owners on one farm, (300 cows), and one contract milker with some owner support over calving and at key times, on the second farm, (235 cows).
• Weekly hours worked do not exceed 45 hours per week. Staff get 4 weeks annual leave plus statutory leave.
• Owner unpaid input covers Justin full time across both farms, Melissa assisting with calf rearing as well as input from both of them for all financial management, administration and governance.
• Time off farm is important for the owners. With at least two family holidays planned each year as well as one individual holiday each.
• Processes are in place to ensure the business is compliant for all health and safety requirements.
• Induction meetings are carried out for new staff.
• Monthly meetings are held with for all involved on the farm.

Overview
August 15th, 2023

A $1.25 drop in the advance means about $265,000 has disappeared from income. We are going back to a zero budget, where every single expense has to prove a return. Some revisions include:

• Marginal milk will be cut further as the returns have dropped, so extra feed will not be purchased to keep cows milking for longer
• OAD and early culling to reduce feed intake will be considered after Christmas
• We have put on fertiliser in good years and our levels allow us to mine the farm this year. The new farm is waiting soil test results etc. so we will just have to be strategic as to what fertiliser is required there
• We have split our herd codes for the two farms and will be herd testing the sire-proving heifers through the new shed so we can cut herd testing on our original herd. This means the SPS rebate will cover the cost of herd testing on that side
• Replacing our first-choice heat detector strips for a cheaper version has resulted in a 20% saving
• I am considering full-time work.

What advice would you give to farmers who are either first time sharemilking or farm owners?

Update your budgets and go into each month eyes wide open so there are no surprises.

Work out percentage returns for $$ spent. I know it's never an exact science but as a sharemilker anything under 30% on an average pay out is not the focus of your energy.

If you are a first farm purchaser, follow best practice financial management which includes setting and following a budget, monitoring cash flow and sharing with your bank manager. Set a strategy for interest rates etc and work out what the full season looks like.

What words of positivity would you give to farmers planning for the coming months ahead?

The best lessons are learnt in hard times.

We rebounded and purchased our farm post $3.90 pay out because we had managed the low and were ruthless with our spending. Opportunities flow in times like these.

Do you have any tips and tricks for looking after your people on farm?

Make sure you are well, which will allow your team to be happy in their job.

Enjoy the team spirit on the farm. Having a good culture makes farming enjoyable and relieves some of the stress.