Budgeting, Medium Input System (South Waikato)
6 min read
This small north-east facing farm near Arapuni, has a simple, sustainable system for continued profitability. The farm is 68 ha in size, milking 215 FJX cows operates a medium input system, with a production target of 84,500kg MS/year. Infrastructure and farm systems are in place to enable a contract milker to manage the farm, with the owners living off farm. Key to success is controlling farm expenses and consistent budget monitoring.
This small, north east facing, system 3 farm, near Arapuni, is typical for the area with a rolling contour.
A simple sustainable farm system is key to maintaining this profitable farm business that allows the owners to stay involved in farming but also enjoy quality time off farm.
This farm has infrastructure and farm systems that enable one person to manage the farm by themselves with just a little help with calf rearing. As a small farm, it is important that farm working expenses are kept well under control so there is no wasteful spending. Regular and frequent budget monitoring is key to this.
A focus on debt repayment in the past nine years has given our business the resilience needed now to cope with this downturn in payout. The latest drop translates into $105,000 being lost from expected income.
We have revised our budgets, and cashflow forecast, using a $5.20/kg MS advance, ($6.75 /kg MS final payout). This has shown that:
What advice would you give to farmers who are either first time sharemilking or farm owners?
Don't bury your head in the sand! Revise your budgets as soon as there is any change in payout. Just understanding the impact on your bottom line will help you feel in control. You will be able to make better decisions once that is done.
Maintain good communication with your banker and accountant.
What words of positivity would you give to farmers planning for the coming months ahead?
Costs at this time of year are largely essential, so don't make any rushed decisions on cutting spending. Focus spending on areas that make money.
Concentrate on getting the basics right; Follow the spring rotation planner and keep doing your feed budgets.
Do you have any tips and tricks for looking after your people on farm?
Good communication is key so staff understand what impact the lower payout is having on the farm plan and what the new plan looks like.
Arapuni, South Waikato
68 ha effective milking platform, no support block
26/7/2023 MA cows (21/7/2023 Heifers)
3 (11-20% feed imported)
84,500kg MS/year budgeted, 1,243 kg MS/ha, 393 kg MS/cow
Production (last 3 years):
82,870kg MS average
|Financial KPI 2023-24 budget|
|Net dairy cash
|Total farm working
|Dairy operating profit ($/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
People, health and safety
|Net Milk Sales
This budget is for a June 30th balance date. Milk income is based on deferred income for 79,524 kg MS @ $1.34/kg MS, (received July to October 2023), and advanced income for 84,500 kg MS @ $6.65/kg MS, (received July 2023 to June 2024). The Fonterra dividend is estimated at $0.45/share of 90,800 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 the sale of 48 MA and R 2 heifer culls @ $650/head, 140, four day old calves @ $35/head and 5 R 2 steers @ $1400. Includes the purchase of one 2 year old Angus bull and the sale of one 3 year old Angus bull.
|NET DAIRY CASH INCOME||751,800||8.90||3,497||11,056|
|Wages (incl. ACC)
This is payment to the contract milker and covers remuneration for 1.0 FTE plus some relief milking and allowances for calves reared. The contract milkers is responsible for the costs of dairy shed consumables and running their farm bike. Included under wages is remuneration to the farm owner for 0.30 FTE work provided to the business. This covers on farm work, governance, administration and strategic planning.
This covers mineral supplementation via drenching from calving till late November, (Mg and a probiotic), Se via drench November and January, plus a Se injection in the winter. Heifers are given Cu when they return to the farm. No other Cu supplementation is given as the milkers get PKE all year and this is high in Cu. Drenching with zinc for facial eczema starts in late January. The herd SCC for 2022-23 was 121,000. High SCC cows are treated with longer acting dry cow at drying off. The rest of the herd is also blanket treated with dry cow antibiotic.
|Breeding and herd improvement
AB is for 3 1/2 weeks using A2 semen. The majority of the herd is mated to dairy breeds although a few lower BW cows or likely culls are mated to beef semen. 2 bulls are run with the herd for another 6 weeks to give a 9 1/2 week mating period. This cost includes the lease of 3 bulls for the heifers. Herdtesting is 4 times a year - usually twice with 2 milkings and then 2 tests over 1 milking, (after January when the herd is on once a day). Includes the lease of 2 bulls to be used over the R 2 heifers. Includes DNA testing of replacement heifers.
This covers milking machine testing, rubberware and other incidentals that are the owners responsibility.
|Electricity (farm dairy, water supply)
This is higher than average as the effluent system is driven by electric motors - for both the stirrers and pumping, (much of which is up hill).
|Supplements made (incl. Contractors)
Approximately 40 t DM of baleage, (220 bales, 185 kg DM/bale), is made on farm using contractors for all the work. The expected cost is about $240/t DM or $44/bale.
The budget is for 140 t PKE, (wet), @ $380/t landed. This is less than previous years as there is more baleage and maize silage on hand than usual at the start of the season. This is fed in the paddock in trailers everyday to the milkers at rates of 2 kg/cow/day up to 4 kg/cow/day.
43 replacement heifers and 8 beef steers will be reared for the 2023-24 season. This cost is for about 3.0t meal at $1,150/t. The calves are reared on colostrum, milk and meal and are weaned at 90-100 kg liveweight. Bedding and equipment costs are included.
|Young and drystock grazing
43 weaners from late November till May 1st at $9.00/head/week and then May 1st to May 31st at $11.50 plus 43 R 2 heifers from June 1st to May 1st at $11.50/head/week.There will aslo be 8 carry over cows at grazing for 52 weeks at $12/head/week. Includes freight and the cost of grazing for 2 bulls during the mating season. Does not include the costs of drenching, that is in with animal health.
|Fertiliser (incl. N)
This is net of fertiliser rebates of about $2,500. Fertiliser applied includes 130kg N/ha/year over 6 applications of 23kgN/ha each, from May to January. Depending on the time of year it is in the form of Ammo 30, (urea and Sulphate ammonia mix) in the early spring, SustaiNK mix, (23 kg N/ha and 25 kg K/ha), or urea. The autumn fertiliser applied is a mix of N, P, sulphur and Mg.
|Regrassing & cropping
The budget allows for about 7.5 ha of direct drilling into pasture for pasture renewal. At this stage the plan is to not plant any maize as there is 3 times as much maize silage on hand at the start of the season than usual, (75 t DM compared with about 20 t DM). However, the budget does include about $7,000 for planting and harvesting about 1.6 ha of maize which is about half of what is usually grown. Whether this happens will depend on the season, pasture cover in the late spring and the milk price.
|Weed and pest
Weeds and pests are not a problem. California thistles are the main problem. There is still plenty of chemical on hand from the 2022-23 season so costs should not be too high this year.
|Vehicles & fuel
Fuel is quite high as the tractor is used every day to feed out, and the owner has to travels some distance when working on farm.
|R&M (land, buildings, plant, machinery)
Infrastructure and buildings are in good order so no large R and M projects planned. The farm has its own rhyotlite pit so tracks and races are maintained quite cheaply.
|Freight and general farm expenses
Includes bio security levy of $2000. Covers protective clothing and general freight.
Do own GST, have own payroll system. Covers accountant, computer/communication and general administration costs.
As per latest rates demands, includes district and regional rates.
|TOTAL FARM WORKING EXPENSES||506,230||5.99||2,355||7,445|
|CASH OPERATING SURPLUS||245,570||2.91||1,142||3,611|
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 finish the season with 12 fewer R 2 heifers, 4 more MA cows and 1 less R steers. This value of change in livestock numbers is at IRD NAMV for 2023.
All owner input is included under wages paid and is at market rates.
|Feed inventory adjustment
Expect to have about 62-63 t DM less on hand at the end of the season, as opening supplements on hand are significantly higher than usual as very little maize and silage was fed autumn 2023.
|Owned support block adjustment
Allowance for about 2.7 ha of off farm land that is used for 10-11 beefies which are included in calf rearing and stock sales.
Based on previous years financials plus allowing for additional purchases/sales and another years depreciation.
|DAIRY GROSS FARM REVENUE||742,100||8.78||3,452||10,913|
|DAIRY OPERATING EXPENSES||562,130||6.65||2,615||8,267|
|DAIRY OPERATING PROFIT||179,970||2.13||837||2,647|
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