Budgeting, Rachel and Kenneth Short (Taranaki)
24 min read
Rachel and Kenneth Short own a 168 ha self-contained, organic farm in Coastal South Taranaki, milking 350 Jersey cows and grazing all young stock. In addition to all their own stock another 50-55 yearlings are grazed for their second organic farm. Their mission is sustainable, profitable production of specialty milk while minimising environmental harm. Regenerative pasture and soil management are a key part of their farm management plan. They've recently introduced Halter technology, which adds $0.35/kgMS to their farm working expenses.
Rachel and Kenneth Shorts' self-contained, very low input, organic, coastal Taranaki farm is embracing regenerative pasture management practices. The business focus is on sustainability and profitable production of high-quality specialty milk with a low environmental footprint.
Rachel and Kenneth are motivated to make the most out of a self-contained system with decisions made accordingly to manage the resources and pasture grown for each season.
This is their first full season with Halter technology which equates to $0.35/kg MS. Grazing income for the heifers from their second farm equates to $0.20/kg MS.
Coastal South Taranaki
168 ha effective with all young stock on farm, plus 54 yearlings from second organic farm
20/07/2023 MA cows
2.3 cows/ha (3 cow equivalents/ha with weaners and and all R2 heifers)
1 (no imported feed)
115,000 kgMS/year, 330kg MS/cow, 685 kgMS/ha (budgeted).
How has the season been so far?
October 20th, 2023
What are cash flow forecasts looking like? How will a drought impact this?
Has the NIWA El Nino forecast changed how you are approaching this summer?
Not really. The NIWA forecast for our area for the next couple of months is still for normal rainfall. That said, we always have dry summer strategies in our overall farm plan.
What strategies do you have this season for when a drought comes early, late, or is prolonged?
|Financial KPI 2023-24 budget|
|Net dairy cash
|Total farm working
|Dairy operating profit ($/ha)|
|Physical KPI 2-year average|
|Pasture and crop
harvested (t DM/ha)
surplus (kg N/ha/yr)
|GHG (t CO2
in-calf rate (%)
Strategy and financial
The approach is to have a certified organic farming system that is sustainable and enhances soils, pasture and livestock. We have no compliance issues, and the number of international organic audits we have in a season strengthens our ability to market our product.
Farm environment plan
The farm environment plan was completed in the autumn of 2021. There are no actions required with the last of the required riparian planting being completed in 2021-22.The farm has had a tree planting plan done in 2022-23 to provide guidance for all future plantings. The plan will be enacted over several years, but will provide more shade, shelter and food for the stock.
We have strong awareness of the value of water. Peak daily use is 35 litres of water/cow in the cowshed. There is a focus on minimising water consumption.
Soil testing, soil fertility and N applied
The farm recently undertook a new strategy for its nutrient management plan on farm. The farm is using biological fertilisers to help unlock the nutrients that are already available in the system by applying fish & seaweed fertiliser.Typically the N,P,K,S percentages of these fertilisers are 2.2%N, 1.55%P, 0.28%K and 0.18%S. The farm currently applies 2 passes of the liquid fertiliser per season meaning a small amount of N & P are applied during those times but the main idea to provide organisms a feed source. All liquid fertiliser is spread using own machinery and weather forecast is monitored before applying.Improvements in topsoil structure and worm populations were already being observed just six months after changing to biological fertilisers and mixed pasture species.There has also been less ponding and pasture loss following heavy rainfall in the winter and spring with the improved soil structure.Soil testing is carried out every 2-3 years to monitor the soil fertility status and compare with pre organic levels. Soil tests being done are both traditional and those that evaluate the soil microbial health.
Shelter and riparian planting
100% of waterways are fenced. Extending areas of riparian planting and of shelter belts is ongoing. Maintenance of existing plantings includes manual release of trees and shrubs and replacing plantings that are lost to flooding or pests, (mainly rabbits).
Farm policy and infrastructure
People, health and safety
Budget revision following milk payout drop August 2023
August 15th, 2023
The forecast milk price for Fonterra Organic farmers has not been lowered yet. By July 2023, organic suppliers were advised the contracted sales for organic milk products for the 23-24 season were already up on last year so this has probably cushioned the immediate impact of the latest GDT figures. At this stage little has changed in our budget for the following reasons:
What advice would you give to farmers who are either first time sharemilking or farm owners?
Keep up to date with your cash flow information and maintain good communication with your bank, accountant, and key suppliers of goods and services, so there are no surprises and any issues can be dealt with proactively.
The focus, as always, is to try to use resources as efficiently as possible and minimise waste.
Ensure pasture grown is fully utilised.
What words of positivity would you give to farmers planning for the coming months ahead?
The industry has gone through these troughs before and will rebound.
Many are in the same boat, so look out for each other.
Do you have any tips and tricks for looking after your people on farm?
It is not just affecting farmers but also those who service the rural communities. You will need them in the long term so good communication and continued support are important.
|Net Milk Sales
Milk revenue is based on 115000 kg MS @ an advance price of $7.60/kg MS, 119,428 kg MS @ a deferred price of $2.00/kg MS and a Fonterra dividend of $0.40/share on 130,000 shares. The milk prices used are as per Fonterra notification late May 2023 for Organic farm supply and are May paid June prices, (this farms financial year is 1 July to 30 June). This is net of the DairyNZ levy, (3.6 c/kg MS). Milk income: 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
Based on approximately 81 MA Jersey cows and empty R 2 heifers @ $550, 14 R 2 bulls @ $1000, and 250 Bobbies at $20. Any animals born after 2020 are sold as organic meat so receive a premium of $100/head at slaughter.
|Other Dairy Cash Income
Rent from staff for housing housing plus grazing for 54 yearlings, from second organic farm near the coast, for 52 weeks
|NET DAIRY CASH INCOME||1,259,800||10.95||3,599||7,499|
|Wages (incl. ACC)
This is the gross wages including employee house allowance for 0.6 FTE permanent staff member, (25-30 hours per week and most weekends off).
Focus is on prevention rather than cure. The approach to animal health is kept simple and is based on good observation. The farm has good infrastructure so things like lameness are not an issue. SCC for 2022-23 was 186,000. Calving is Jersey on Jersey so there are fewer calving related difficulties/vet visits. Standard minerals are used and required vaccinations are carried out, (Lepto). BVD not a problem - milk test is used. Calf horn de-budding is included in animal health costs. Johnes testing is done annually from herd test milk samples. Incidence is low now and there are no clinical signs of the disease. As part of being fully organic certified and as a participant in the Well Farm project, the herd will be independently condition scored, (by vets), four times a year. BCS at drying off mid May 2023 was 4.5.
|Breeding and herd improvement
Includes the cost of DNA testing calves 90-100 calves and herd testing. Mating is AB for 6 weeks followed with bulls for 5 weeks. 8 R 1 bulls are used on the heifers and then used on the herd. Only one lot of bulls is needed as the heifers are run on the milking area. The empty rate for the herd for 2022-23 was 16%, the highest recorded for the farm unfortunately. Also included in this expense is registration of about 90-100 heifer calves with the breed society Jersey NZ.
Includes detergent, rubberware, (replaced once per year), and miscellaneous shed expenses. Standard cleaning procedures and recommendations for detergent use are followed.
|Electricity (farm dairy, water supply)
Focused on efficient processes so good cow flow and efficient routines have decreased milking costs. Have varivac fitted to machines so electricity usage is more efficient. This includes the cost of access to the water scheme that provides all the farm water via gravity feed. Shed/farm Power is $10,000 and water supply is $6,200.
|Supplements made (incl. Contractors)
Only genuine surpluses harvested off the 168 ha. For 2023-24 the plan is to make 500 bales of hay, (15 bale equivalents). The cost includes paying for an external contractor for baling only.
This is for the costs for bedding and sundry equipment. The plan is to rear 80-100 replacement heifer calves and 12-14 bull calves. Calves are reared on colostrum, whole milk, pasture and hay. This has been the practice for the last 3 years and it has worked well.
|Young and drystock grazing
Not required as all young stock -110-115 weaner replacement heifers and bulls, 104 R 2 heifers and 14 R 2 bulls, (until summer), are grazed on the 55 ha of the farm. This area also will provide winter grazing for the herd, grazing for 54 yearlings from a second organic farm for 52 weeks, plus all the hay, (500 bales 15 bale equivalents), for the herd and young stock. The 55 ha are not quite adjacent to the milking area so having additional young stock there greatly reduces the need to move milking cows along a public road.
|Fertiliser (incl. N)
Following a review with regenerative farming consultants, fertiliser for the farm is based on organic fish, seaweed and humates. A fit for purpose spreader is owned so spreading is all done in house. Cost includes $800 for conventional soil testing and $2,300 soil microbial testing.
|Regrassing & cropping
Much of the farm has now been planted with multi species pastures so no regrassing is planned for this season. This cost is for some seed for a bit of remedial reseeding. The 2023-24 plan is to use deferred grazing on the main milking area in the summer rather than planting any summer multi species crops so there is little regrassing and cropping expense for the 2023-24 season.
|Weed and pest
Weeds and pests are not usually a problem. Weed control is a combination of manual control or an organic spray. The spray is mainly used for gorse on the river boundary. This cost also includes equipment and supplies for organic pest trapping and control.
|Vehicles & fuel
Do most of the harvesting and tractor work so this cost includes the fuel costs associated with that. Includes $19,500 for fuel which is up on previous years due to price rises.
|R&M (land, buildings, plant, machinery)
The farm has been well maintained over the past years and buildings and infrastructure are in good condition. Very little maintenance is planned but have included $13,000 for buildings, $8,000 for fencing and $2,000 for tracks and drains. A lot R and M is done in house, so reliance on contractors is minimal. This cost includes the maintenance of the harvesting machinery owned and cowshed plant maintenance of about $7,500. An allowance of $10,000 is in the budget to cover contractors for riparian plant release, the purchase of hemp/wool mix weed mats for weed control around new tree plantings, and for the purchase of about 1,000 flax pants and 600 shade trees. The additional plants are to replace existing plantings lost to flooding or rabbit damage.
|Freight and general farm expenses
Includes costs for protective clothing, bio-security supplies, (disinfectant, brushes etc), rubbish disposal, dead cow removal and bio-security levy.
Do own GST, PAYE and budgeting. Includes administration and accounting fees for two financial entities, $2,000 for Organic auditing fees which is an annual requirement for Organic certification, plus travel costs relating to visiting other organic farms and organisations as part of continued learning about organic farming. Satellite pasture assessment is used, so fees for that are also included here.
Includes: milk losses, loss of cows, public liability and property. This is something that is reviewed annually to make sure it is still relevant.
All cover is with a private insurer and is not included in the farm budget.
As per rates demand.
Halter subscription costs for 350 cows, paid in advance in one lump sum, so get one month free.
|TOTAL FARM WORKING EXPENSES||360,700||3.14||1,031||2,147|
|CASH OPERATING SURPLUS||899,100||7.82||2,569||5,352|
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 end the season with 4 fewer R 1 heifers, 30 more 2 R 2 heifers and 21 fewer MA cows. IRD NMAV, (National Average Market Values), for 2023 are used to estimate the value of change in dairy livestock numbers. Net livestock income , (cash and non-cash), equates to $0.40/ kg MS.
This is for 1.75 FTE, (3600 hours) of unpaid labour input from the business owners and family.
|Feed inventory adjustment
Expect to have no significant difference in opening and closing feed on hand for the season, (45 t DM of hay opening and closing).
As per financial statements for 2021-22 year, with allowance made for two more years depreciation. There have been no significant asset purchases in the past year and none are planned for the 2023-24 season.
|DAIRY GROSS FARM REVENUE||1,265,900||11.01||3,617||7,535|
|DAIRY OPERATING EXPENSES||493,700||4.29||1,411||2,939|
|DAIRY OPERATING PROFIT||772,200||6.71||2,206||4,596|
2021-22 season review
|Milk Production (kgMS/ha)||774||762|
|Milk Production (kgMS/cow)||325||326|
|Net Dairy Cash Income ($/kgMS)||$8.06||$10.46|
|Total Farm Working Expenses ($/kgMS)||$2.28||$2.95|
|Cash Operating Surplus/Deficit ($/kgMS)||$5.78||$7.51|
|Gross Farm Revenue ($/kgMS)||$8.13||$10.35|
|Operating Expenses ($/kgMS)||$3.20||$3.87|
|Operating Profit ($/ha)||$3,811||$4,939|
*These KPI's are based on cash book actuals to 31 May 2022 and estimated non-cash adjustments. The final financial performance based on financial statements may differ.
2020-21 season review
|Milk Production (kgMS/ha)||774||792|
|Milk Production (kgMS/cow)||325||326|
|Net Dairy Cash Income ($/kgMS)||$8.81||$9.52|
|Total Farm Working Expenses ($/kgMS)||$2.78||$2.65|
|Cash Operating Surplus/Deficit ($/kgMS)||$6.03||$6.87|
|Gross Farm Revenue ($/kgMS)||$8.75||$9.19|
|Operating Expenses ($/kgMS)||$3.63||$3.52|
|Operating Profit ($/ha)||$3,965||$4,493|
*These KPI's are based on cash book actuals to 31 May 2021 and estimated non-cash adjustments. The final financial performance based on financial statements may differ.
Other points of interest
2019-20 season review
|Milk Production (kgMS/ha)||774||653|
|Milk Production (kgMS/cow)||325||273|
|Net Dairy Cash Income ($/kgMS)||$8.19||$9.45|
|Total Farm Working Expenses ($/kgMS)||$2.57||$3.06|
|Cash Operating Surplus/Deficit ($/kgMS)||$5.63||$6.39|
|Gross Farm Revenue ($/kgMS)||$8.07||$9.58|
|Operating Expenses ($/kgMS)||$3.40||$4.05|
|Operating Profit ($/ha)||$3,614||$3,609|
*These KPI's are based on cash book actuals to 31 May 2020 and estimated non-cash adjustments. The final financial performance based on financial statements may differ.
Other points of interest
2018-19 season review
|Milk Production (kgMS/ha)||774||743|
|Milk Production (kgMS/cow)||325||324|
|Net Dairy Cash Income ($/kgMS)||$6.76||$6.40|
|Total Farm Working Expenses ($/kgMS)||$2.31||$2.72|
|Cash Operating Surplus/Deficit ($/kgMS)||$4.46||$3.68|
|Gross Farm Revenue ($/kgMS)||$6.71||$6.55|
|Operating Expenses ($/kgMS)||$3.24||$3.63|
|Operating Profit ($/ha)||$2,684||$2,173|
*These KPI's are based on cash book actuals to 31 May 2019 and estimated non-cash adjustments. The final financial performance based on financial statements may differ.
Other points of interest
2017-18 season review
The first half of the 2017-18 season was defined by extreme weather conditions.
The very wet winter and spring and associated reduced pasture growth and utilisation saw the herd put on once a day in early October.
This was followed by a sudden change to extreme dry with less than 20% of the average rainfall falling from mid-October to early January.
Despite being on once a day milking since October and culling 14 % of the herd, the on farm situation in late December was critical, with very low pasture cover, no supplements made on farm and limited options for purchasing supplements due to the constraints with the conversion to Organic supply.
The decision was made to dry the whole herd off in late December with production at 41% of budget. This decision was not made lightly but was helped by having a strong balance sheet and good support from the bank.
The farm situation as at 31/5/2018 had the whole herd in condition score of 5.4+ and pasture cover of 2,900 kg DM per ha. Wintering 2018 was planned to be all grass with maintenance levels of feeding.
Given the season, the limitations for importing feed as an organic farm and the farm position going into the 2018 winter, the decision to dry off so early was definitely the right one for this farm, the people on the farm and the animals. It means that the physical effects of the poor season will not carry over to the 18-19 season, (or beyond).
2016-17 season review
|Financial KPI's*||Budget||Actual||Physical KPI's||2016/17|
|Net Dairy Cash Income ($/kgMS)||$5.00||$6.38||Milk Production (kgMS/ha)||769|
|Total Farm Working Expenses ($/kgMS)||$1.89||$2.30||Pasture and Crop Eaten (t DM/ha)||12.4|
|Cash Operating Surplus/Deficit ($/kgMS)||$3.11||$4.08||Imported Supplements & Dry Cow Grazing (% of total feed eaten)||0%|
|Gross Farm Revenue ($/kgMS)||$4.93||$6.41||Six Week In-Calf Rate (*A=Actual E=Estimated)||64% E|
|Operating Expenses ($/kgMS)||$2.76||$3.21||First Calvers on Farm End of Season(% of first calvers at start of season)||81%|
|Operating Profit ($/ha)||$1,809||$2,455||Milksolids per Labour Unit (kgMS/FTE)||49,819|
*These KPI's are based on cash book actuals to 31 May 2017 and estimated non-cash adjustments. The final financial performance based on financial statements may differ.
An unplanned staffing shortage in the autumn (2 IC off for 10 weeks due to a non-farming related accident), that also coincided with a difficult family time, put extreme stress on the business. Employing and successfully integrating new relief staff at this time was made easier having robust systems in place. Keeping things simple made it easier to cope when adversity struck.
We farm for profit and sustainability so our budget can cope with an 8 % variation in milk production. Operating profit would still have been over 1300 $/ha without the payout increase and including the $32446 increase in FWE.
Revenue was up due to the increase in milk price and better than expected stock prices, and most of the increase in farm working expenses was either a conscious decision to do catch up R & M or dealing with unplanned breakdowns.
Any additional cash surplus from this year has been used to reduce debt and strengthen the financial position of the partners.
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.
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