Budgeting, Will Green and Sally Eames (Mid Canterbury)

With over 70% of the herd calved already, and milk production well up on the same time last season, it is important to ensure the good start to the season is maintained. We have gone into calving with higher than expected pasture cover due to good winter growth rates so the key is to manage the pasture eaten in the first round to ensure no grass is wasted. This can be the difference between a good season and a great one. This year, with a lower payout, we need a great season! Other key points for our business are:

• Sufficient overdraft facilities are already in place as we have always stress tested our budgets with lower milk prices to fully understand what the outcome will look like and have strategies to minimise risk to the business.
• Our focus is to stay within the farm's current lending criteria from the bank even though there is equity that could be used. This ensures the business won’t go backwards. It also demonstrates our financial discipline to the bank which is of benefit in the future. The current season's budget, (re worked on $6.75/kg MS final), shows that debt repayments will continue as planned. If milk prices drop further this may be reviewed.
• The purchase of a herd to lease out earlier this year is vulnerable to increasing interest rates. At current interest rates there is still about 1.3% leeway before the debt servicing costs exceed the lease revenue.
• I have taken on a farm supervising role with DHL for two days per week. The net cash benefit is small as extra labour has been employed for the farm. The main upside of the off farm work is the personal growth that will come from this, and the long term gains from building my own consulting business.
• Being off farm two days a week also means that the farm staff have more responsibility. With staff roles expanded, they are able to increase their skills without having to look elsewhere for job growth. This helps with staff retention which is a positive for the business.

Look for any opportunity to reduce the need for short term finance (OD) as this is at a much higher interest rate than other debt.

• For SI farmers and sharemilkers, the biggest cash flow pressure at the moment is paying winter grazing bills, which can stretch overdraft levels. Check with graziers to see if there is opportunity to set up a payment plan which spreads the costs.
• We have always used the Farm Source winter power deferral payment option. Again this reduces costs when income flow is low. It doesn’t save costs other than the cost of overdraft which can get out of hand.
• Farm Source also has six months interest-free credit on purchases over about $500-600.  Again this can be used to spread cashflow and reduce the impact on OD.
• Don’t buy anything until absolutely necessary. If you can delay purchases until the first of the month, this means the invoices won’t be due until the 20th of the following month - again delaying payments until the bigger milk payments are received.

Revise your budgets and review expenses to identify savings that can be made without impacting farm performance. You may be surprised at just what can be achieved.
For example:

• Talk to your accountant about provisional tax liabilities. Moving to payments based on estimates rather than last year’s financial performance will make a big difference.
• Also ask you accountant about deferring terminal tax payments for six months. IRD interest rates are currently cheaper than Bank OD rates.
• We are currently reviewing herd testing and may reduce the number of herd tests or even cut it out altogether if there is further pay out decline.
• We have extra young stock at grazing as a way to increase assets. We can currently afford to keep the extra stock so will do so as it puts us in a better position to take advantage of future opportunities such as farm purchase. However, in some cases it might be prudent to sell surplus stock which would free up capital and reduce costs if cash flow is extremely tight, and not rear extra stock as that would further increase costs.

Our staff are all on hourly rates which gives more flexibility with how they work.

We have always made the financial performance of the farm available to our staff. They understand the impact of the lower milk prices on the farm business and are reassured that their employment will not be impacted detrimentally.

Strategic focus
People, Pasture, Profit

Vision
Use pastoral focused farming and wealth creation principles as a pathway to build equity to purchase a farm and build a family home in an area we would like to live, that is of sufficient size to deliver good returns and also provide scale to employ staff and not be tied to the farm every day and so ensure a good life and work balance.

Values
Honesty and integrity. Strong team culture in a safe, fun and prosperous work place. Have active involvement in the community. Leadership and being active in within the dairy industry. Support New Zealand owned co-operatives. A healthy work life balance.

Financial
Prepare budgets and continually review and update them so decisions can be made proactively. Focus on debt repayment so that the good cash flow and equity from the sharemilking business can be used to to help passive investment opportunities. Current equity and cash flow has allowed for the purchasing of additional stock which have been leased out for the 2023-24 season. (This investment is not shown in the 2023-24 budget - that only shows the operational finances for the sharemilking business).

Networking
Identify and interact with peers to continue to learn from them. Encourage and share information with staff and other new entrants to the industry to enable them to progress.

Environment
The farm is committed to reducing purchased N surplus and methane emissions while maintaining profit, through being more efficient with use of inputs and harvesting pasture.

Farm policy

• Run a low input, system 2 which has a low environmental footprint.
• N loss to water is minimised by matching feed demand to the grass curve.
  This is done through the strategic use of urea, 170-180 kg DM/cow of pasture baleage and crop straw, (imported from DHL support blocks), to fill winter and spring deficits and by starting to destock early, (obvious culls are gone in early December and empty cull cows are all off the farm by the end of March).
• 90% of the herd wintered off.
• Two herds are utilised most of the season, milking twice a day.
• All young stock off farm by mid-December.

Infrastructure

• 54 Bail rotary shed with 2 people milking/moving herds.

• Cup removers were installed in 2022 which has reduced need for 0.5  in the shed.

• The farm is fully irrigated by two centre pivots with corner sprinklers and K-line irrigators.

• Races, fencing and water supply are all in good order and regularly maintained. The farm policy is to undertake capital upgrades when milk prices are favourable. To do so ensures infrastructure and resources remain in good order.

• The farm has good calf rearing and implement sheds.

Soils and fertility
67% are well drained Brown soils. 33% imperfectly drained pallic soils. Olsen P ranges from 21-57 and pH ranges from 5.6-6.5.

Fertiliser and nitrogen
The plan is to apply 167 kg N/ha, (as urea), for the year over 6 applications to the non-effluent areas, with 3-4 applications up to December then 2 in February and March. The effluent area receives 3 applications of urea. The farm is soil tested every year and fertiliser applied is as per recommendations, (last season 42 kg P/ha applied and 31 kg K/ha).The farm has soil moisture monitors so super phosphate, (P and S), is able to be applied in the winter in June and July when soil moisture levels are suitable. Potassium is applied in September with the September nitrogen application.

Effluent
14 days effluent storage. Effluent is applied via traveling effluent irrigators to 30% of the farm.25% of herd can be stood off paddock on the cowshed collecting yard. This is seldom required and only happened three times in the 2022 season. Wet soil conditions can usually be managed by adjusting the grazing area and increasing feed allocated.

Pasture
Pasture and crop eaten is 14 -15 t DM/ha. The district average is 16 t DM/ha so the aim is achieve this or better. Improvements have already been seen with better weed control and with improved pasture species from regrassing 10% of the farm each year. Regular and frequent pasture monitoring and feed budgeting are critical to ensuring excellent pasture utilisation. Spring pasture surpluses are managed through taking paddocks out for regrassing. The aim is to control pasture quality without needing to use a mower for topping or harvesting supplements.

Feed policy
The aim is to have very little pasture grazing waste. This is achieved through having a high stocking rate and applying nitrogen early in the season to grow and utilise as much pasture as possible through the spring. A small amount of purchased baleage is on hand to use through the spring for any short term feed deficits. Balancing feed supply and demand from early December to late March through destocking reduces the need to use nitrogen and imported feed in the autumn, which is the high risk period for N leaching in Canterbury.

Supplements purchased
About 120 kg DM/cow of baleage, (126 t DM), for the spring and 80 t DM straw are purchased each year for dry cows though the winter and calving and also for use at drying off.

Supplements made on the milking platform
The plan is to harvest all the pasture with the herd and use regrassing in the spring to manage any surpluses that arise. Very little surplus pasture is harvested each year, (last seasons no baleage was made).

Regrassing
Approximately 10% of the farm is being regrassed each year to improve pasture species. This is done as grass to grass in the spring using a pasture seed mix of dairy diploid ryegrass and white clover direct drilled. The area to be regrassed is not set in stone and is dependent on the farms pasture cover in the spring. If pasture cover is too low at cultivation time then less area will be taken out of the rotation.

Irrigation
77% of the farm is irrigated via centre pivots. The balance of the farm area is split equally between K line irrigation and sprinklers. It takes about 2.5 hours per day shifting the k-lines and sprinklers. Policy is for all staff to be competent in shifting the irrigation so the work doesn’t always fall to one staff member.

Winter grazing
90% of the herd is grazed off for 54 days, with the first cows leaving the farm form Mid-may and the final mob gone by June 1st. The cows return in batches starting 2 weeks prior to due calving dates.The 10% of the herd remaining on the milking platform over winter are those that need extra attention. They are ad lib fed through to calving.

Young stock
The last of the calves leave the farm as weaners by mid-December. They return to the farm mid-July 1st as in calf heifers. The grazing costs include freight, the majority of animal health cost and the provision of bulls for mating.

• The herd is Jersey cross
• Twice-a-day, (TAD), milking is employed for the majority of the season. In the previous 2 seasons milking frequency was reduced to three milking’s every two days from January to give manage staff leave over the summer period.
  With the installation of cup removers and fewer people needed each milking it is the intention that the herds will stay on twice a day through until April when once a day milking will start. The cows will remain on OAD until they are dried off in mid to late May, based on pasture growth and body condition scores.
• The herd improvement budget allows for 1.2 straws of nominated Jersey high BW, high fertility semen and two herd tests per year, (one milking). No anoestrous intervention products are used, although, prior to and during mating an extra herd of non-cycling cows is milked OAD.
  Once a heat has been recorded they are returned to a TAD herd. After 3 weeks of mating any cow not mated is transferred to the OAD herd. Mating is for 10 weeks with AB is used for 5 1/2 weeks, followed by Jersey bulls for 4 1/2 weeks. The Jersey bulls are supplied by DHL as part of their closed herd policy. 29 bulls are provided and rotated between the 3 herds. 
  Heifers are mated with Jersey bulls, at a rate of 1 bull to 15 heifers, with a mating start date 5 days earlier than the main herd. Submission rate for 2022-23 was 91%.The 2022-23 6 week in calf rate was 80% (Actual) and the not in calf rate was 9%.
• The philosophy for animal health is to be observant and proactive. Unplanned vet visits are rare, (only 3 this year so far). The SCC for the herd is below 150,000. The herd is blanket treated with short acting dry cow therapy at drying off.
  Lameness is not a problem with the incidence of lameness less than 6%.Included in the animal health costs are Lepto vaccinations for the herd, selenium injections prior to calving and magnesium and mineral supplementation via in trough dosatron.
  Calf animal health includes 10 in 1 vaccinations, a turbo drench which covers coccidiosis plus a pre wean drench and horn de-budding.
• 320-340 replacement calves are reared. They are reared on milk and pasture and weaned at 80 kg.

• The farm has 3 full time external FTE, 0.75 FTE part time plus 1.2 FTE of Will’s input.
• As an employer it is important to have a good reputation so staff want to come and work for the business.
• By building a good team culture productivity has increased. Making the financial performance of the farm available to staff so they feel involved has helped this.
• Weekly team meetings are held and include incident reporting and health and safety training and updates.
• The farm has good processes and documentation, and is compliant for farm safety and on farm inductions.