Budgeting, Northern Wairarapa
10 min read
These herd owning sharemilkers in Northern Wairarapa are entering their 10th year, farming 165 ha, milking 380 crossbred cows. They lease an adjoining 38 ha for support, which provides grazing for weaners, wintering for about 50% of the herd as well as maize and pasture silage for the milking cows. Continued success for this business is based on milking fewer cows with focus on improved efficiencies and employing simple systems. A conservative approach to budgeting and continual updating ensures no surprises throughout the year.
These herd-owning sharemilkers in the lower north island are about to start their 10th year in this role. The farm owners live off-farm and have their own farm which they run. A 38 ha adjacent support block, leased by the sharemilker, provides flexibility for the business and a degree of security regarding price and supply of feed and grazing.
A conservative approach is taken for budgeting. These sharemilkers know the system they wish to consistently try to run, and while the final profit achieved is an active decision, they try not to let cash flow drive business decisions either. By always being aware of the cash position and cash forecast for the business, it is easier to balance these decisions by using other levers if need be.
165 ha effective
Farm size (support block):
Adjoining 38ha leased in the sharemilking business control
1/8/2023 cows 20/7/2023 Heifers
3 (11-20% feed imported)
200 Cows, (52%), grazed off for 8 weeks
Budgeted for 2023-24, 170,000+ kgMS total, 1030/ha and 447/cow
Production (previous 2 years):
Average is 1055 kgMS/ha and 458 kgMS/cow)
How has the season been so far?
October 20th, 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?
We have already ensured all our budgeted supplement requirements have been arranged with the prices already agreed. This does include a small contingency for a more severe drought.
What strategies do you have this season for when a drought comes early, late, or is prolonged?
As part of our risk management and resilience strategy to cope with weather extremes we are farming with a lower stocking rate already.
If we get an early drought we will review milking regimes and identify which option will work best for our situation at the time in terms of reducing feed demand and supply, and stress on cows.
We have a counter theory on situations where supplements start to run low or there is a prolonged period of bridging the gap until rain comes, which suits our farming situation and resources.
We are in the fortunate situation of having the leased support block next to the dairy farm which gives us the flexibility for off farm grazing at any time. We can fatten culls through the winter and early spring for sale at higher weights and better prices but also have somewhere to graze cows, (on mainly supplement), that are dried off early.
|Financial KPI 2023-24 budget|
|Net dairy cash
|Total farm working
|Dairy operating profit ($/ha)|
|Physical KPI 2022-23|
|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
The farm is run as a system 3 with 11-20% of total feed intake from off farm winter grazing and imported feed, (maize and baleage and PKE if needed).
Weaners leave the farm at 85-90 kg at about 3 months of age and return as in-calf heifers at 22 months of age.
The farm and the support block are managed with 3.0 labour units.
The farm has a centrally located 50 bail rotary, with automatic cup removers, auto teat-spray and protrak drafter. The yards are flood washed using green water and an automated wash system.
Races go in 3 directions and the furthest walk is between 1.1 and 1.3km in each direction.
The farm contour is relatively flat with a variation in elevation no more than 8 metres.
About 15-20 ha are susceptible to flooding from a small creek, after heavy rain, but this does usually drain away quickly.
There is a feed pad adjacent to the shed, with the capacity limited to 300 cows. Lameness increases when higher numbers of cows are on the pad.
A single milking herd is run at all times, (apart from a colostrum/special care mob when required), with the shed being able to be operated by one person.
With a lower stocking rate the aim is to try and maximise days in milk. This means 365 day milking. With 3 in 2 and OAD milking frequency used in the autumn/winter.
Typically the majority of silage supplements are fed late summer to mid spring.
Once heifers are teat sealed they are run with the milking herd for 3-4 weeks over the winter to get them used to the rotary milking shed.
Budget cows are sold at the end of season but empties are usually milked into August and either culled or sold into farm owners calf rearing operation.
Some maize is grown on the milking platform, usually on the most distant paddocks, (about 4-5 ha), so these can be regrassed with newer pasture species. About 13ha of chicory is done on the milking area every year as well.
Effluent from the feed pad is utilised on the crops where possible.
About 380-400tDM/year total imported feed is used, which equates to about 1000-1,052 kg DM/cow.
Supplements fed in most seasons are predominantly imported pasture silage, (from external sources) and maize silage and baleage, (from lease block), with limited use of PKE. PKE is viewed as a backup feed when required and can range from 60-120 t, (wet), depending on the season.
Nitrogen use is 115 kgN/ha. Applications are usually August, Nov/Dec and March depending on soil moisture, rainfall and feed requirements.
The support block provides winter grazing for 200 cows for 8 weeks and weaner grazing for about 100 calves from mid-November until May. In addition about 120-150 t DM maize silage and 18-27 t DM of baleage is harvested and taken to the milking platform. Other feed grown on the support block includes 7.8 ha of winter oats, plus 54 t DM of baleage and some hay retained for use on the support block. The farm owner pays market rates for a 50% share of the winter grazing, weaner grazing and any supplements that are brought back to the milking area. The 7-8 ha of maize is planted each spring. This is followed by oats sown in the autumn for wintering. Then the area is back into permanent pasture the following spring.
The cows move to the lease block for winter grazing as they are dried off. Usually from June but it could be as early as mid-May depending on the season and feed supply on both the support block and the milking platform. Having the support block next door means drying off can be staggered and is based on cow condition, calving date and feed supply.
Similarly, the cows return to the milking area in stages as they are due to calve.
Breeding and herd testing policy
Typical 3, 6 and 9 week calving rates are: 54; 72; 85.The not in-calf rates are typically 14-16%.AB with premier sires and some sexed semen is used for the first 21 – 28 days of mating to generate replacements. Friesian bulls are then run with the herd for another 5-6 weeks to give a total mating period of 9 weeks. Commercial Friesian bulls, (14-16), are usually purchased in August.
They are BVD blood tested and vaccinated then grazed on the lease block until required. Typically the sale price is close to the purchase price.Jersey bulls, (3-4), are purchased to run with the heifers. It is possible that low birth weight Angus bulls could be used instead of Jersey, and the resulting calves would be sold to the farm owners for their calf rearing operation.
This would reduce the number of bobbies sold. Single sample AM herd testing is carried out 4 times a year.
A custom blend of AgVance minerals are used for transition and early lactation which are blended into supplements fed on the feed pad. If no supplements are being fed then pasture is dusted with magnesium and other minerals are administered into the water supply via Dosatron.
Metri checking is carried out 3 times in the spring with appropriate treatments being carried out as required. No other interventions are used over mating apart from strategic once a day milking if absolutely necessary.
SCC average for the season 110000. The SAMM plan is followed at drying off.
Young stock policy
The sharemilking contract allows for 100 replacements reared. However the lease block does allow some flexibility for additional calves to be reared. Care is taken to ensure young stock achieve industry recommended target liveweights.
People, health and safety
A full time herd manager is employed along with a farm assistant for 7 months, (0.6 full time equivalent labour unit-FTE).
Unpaid business owner input equates to 1.4 FTE. This includes time involved with managing the business such as administration and payroll, GST, and strategic and operational planning.
The business owners are passionate about growing and developing staff capability. They enjoy being a part of their journey and helping them prepare for the next step. The work roster for the farm is 11 days on 3 days off.
While documentation is important, the health and safety policy on farm is based around “do no harm”, rather than doing formal recording and paperwork all the time. A lot of focus is on monitoring competencies at induction and training on new tasks to ensure positive and safe outcomes.
Budget revision following milk payout drop
August 15th, 2023
Milk makes money! These farmers remember vividly their first two seasons of sharemilking in the 2015/2016 low payout years and are reflecting on what they did then to help them make decisions this year. They believe focusing on the basics and the core business is key:
What advice would you give to farmers who are either first time sharemilking or farm owners?
We kept as many replacements as allowed in our contract, but no more. Extra calves are a longer term investment but cash is king, so keeping extra will increase costs, (rearing and grazing).
Regularly updating the cash flow meant we had strategies in place to deal with things if the situation changed, which reduced stress and let us focus on farming. We were fortunate to have supportive farm owners as well.
I remember talking well in advance to one supplier about needing their products but not being able to pay for it until February. As this was communicated in advance, they were willing to support us.
What words of positivity would you give to farmers planning for the coming months ahead?
If you can keep positive, you will learn a lot. We thought we were pretty good, efficient farmers but having to really look at costs and operations out of necessity did ultimately bring some positive changes to the way we farm.
Do you have any tips and tricks for looking after your people on farm?
We regularly have a catch-up drink, as a team, at the end of the day. We have found this to be valuable, especially on the tougher days.
During the spring, we always have plenty of food and drink at the shed to keep up energy levels.
|Net Milk Sales
Milk revenue is based on a 50% share of 170,000 kg MS @ an advance rate of $6.40/kgMS to April, (payment received in May), and a 50% share of the deferred payment of $1.68/kg MS on 170,000 kgMS. This is net of the sharemilkers share of the DairyNZ levy of 3.6 cents.*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
Typically 60-70 cows are culled or sold, 150 bobbies and 90 feeder calves to the farm owner. For 2023-24 there are 18 autumn born weaners for sale as well, which will probably be sold in winter for about $500/head. Friesian bulls are purchased in August, BVD tested and vaccinated, then run on the lease block until required. They are sold in the summer and the sale price is typically at break even or slightly above purchase price.
|NET DAIRY CASH INCOME||773,000||4.55||2,034||4,685|
One full time and one part time staff member are employed equating to 1.6 FTE. This is net of staff rent and includes employer ACC costs.
Covers custom blended AgVance minerals for transtion and early lactation, vet visits, metri checking prior to mating, BVD testing for any incoming animals, (herd bulls mainly), mastitis control, calf dehorning,drenches, and vaccinations. The SAMM plan is followed for drying off, and the SCC for the 2022-23 season is 110,000.
|Breeding and herd improvement
Covers 3-4 weeks of AB using premier sires and some sexed semen. Friesian bulls are run with the herd for the rest of mating. Bulls are removed from the herd late December to give a 9 week mating period. Heifers are run with low birthweight Angus bulls, (the resulting calves are sold to the owners calf rearing operation).
Covers detergents, rubberware, and other shed consumables. Rubberware is changed once a year in the autumn. Plant washing system has a metered detergent system.
|Electricity(farm dairy, water supply)
Covers shed electricity to run the 50 bail rotary shed and the effluent irrigator, for 365 days, (milking is all year round).
|Supplements made(incl. Contractors)
The amount of baleage made varies depending on the season. The budget is for a 50% share of 100 bales @$42/bale.
Covers a 50% share of 200 t DM of grass silage imported from an external source. There is no plan to purchase any PKE this season as there is more supplement on hand than normal going into the winter, (approximately 150 t DM). PKE is viewed as a backup feed when required and can range from 60-120 t, (wet), depending on the season.
Approximately 100 replacement calves are reared on colstrum, wholemilk and meal. Includes about 17 t meal at about $1,100/t and $4,000 for bedding and equipment.
|Young and drystock grazing
100 yearlings for 52 weeks @$12/head/week, 50% share. Does not include freight.
200 cows for 8 weeks, are wintered off on the leased support block.
|Support block lease
The cost shown in the budget is the net cost of leasing and operating the 38 ha adjacent support block. This covers the lease paid, rates, fertiliser, cropping and harvesting costs, offset by revenue from the owners share of grazing and feed costs, plus any external revenue if there is surplus feed not required for the farming operation. The support block provides winter grazing for 200 cows for 8 weeks and weaner grazing for 100 calves from mid-November until May. In addition about 120-150 t DM maize silage and 18-27 t DM of baleage is harvested and taken to the milking platform. Other feed grown on the support block includes 7.8 ha of winter oats, plus 54 t DM of baleage and some hay retained for use on the support block. The farm owner pays market rates for a 50% share of the winter grazing, weaner grazing and any supplements that are brought back to the milking area.
This is for a 50% share of nitrogen on the milking area, (115 kg N/ha), plus 50% cartage and spreading for all other farm fertiliser. 50% for crop fertiliser is included here for crops grown on the milking area.
|Regrassing & cropping
4-5 ha of maize is grown on the milking area along with 13 ha of chicory. This cost covers the sharemilkers share for contractors for ground work/drilling, spraying and chemicals and seed.
|Weed and pest
Have own gear to spray weeds, the owner provides the chemical.
|Vehicles & fuel
About 600 hours a year is done on the tractor for feeding out, mowing, scraping the feed pad, race work etc. Covers $18,000 for fuel, the balance is for servicing and maintenance on the tractor and bikes.
|R&M(land, buildings, plant, machinery)
This cost is machinery services and breakdowns, general maintenance and loose tools.
|Freight and general farm expenses
Includes freight for livestock plus protective clothing, dog expenses and biosecurity levy. Included here is also $6,000 of general costs.
Do own GST and pay roll. Includes accounting, computer, communication and general administration costs.
This is reviewed regularly to ensure it remains relevant.
As per last season.
|TOTAL FARM WORKING EXPENSES||490,450||2.88||1,291||2,972|
|CASH OPERATING SURPLUS||282,550||1.66||744||1,712|
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 2 less R 1 heifers, 4 less R 2 heifers, 2 less MA cows and 18 less autumn born weaner beef calves on hand at the end of the season. The value in change in numbers of livestock have been assessed using the IRD NAMV as at May 2022. Net livestock income, (cash and non-cash), is $0.43/kg MS.
Unpaid farm business owner input is 1.4 FTE.
|Feed inventory adjustment
Expect to have about 150 t DM less on hand 31st May 2024 as the seasons opening feed is exceptionally high. The good 2023 summer and autumn meant more baleage was made and less maize and baleage was fed out in the autumn. This is based on a market value for the feed on hand of $390/t DM, (50% share).
As per 2021-22 financial statements plus adjustments for subsequent purchases and sales of fixed assets.
|DAIRY GROSS FARM REVENUE||758,000||4.46||1,995||4,594|
|DAIRY OPERATING EXPENSES||660,450||3.88||1,738||4,003|
|DAIRY OPERATING PROFIT||97,550||0.57||257||591|
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