Tactics for managing your farm business
Topics
3 min read
Maintaining profitability in dairy farming is a challenge, especially with increasing costs. This page provides guidance and tips from seasoned farmers on how to manage your farm's budget effectively.
Managing a viable farm business in the current economic environment is a challenge many farmers are facing. Knowing what actions you can take now and what you need to consider over the coming months will help you plan and give you peace of mind so you can get on with farming.
DairyNZ has pulled together nine tactics to help farmers with their decision-making. These tactics are based on research, data and learning from similar past seasons.
Every farm is different, so take time to consider your options and find what works best for your farm business.
Top tips for tight times from some high-performing farmers
Some of our high-performing farmers have shared how the payout drop will impact their budgets, along with tips and strategies to help navigate these challenging times.
9 tactics to focus on
Tactic #1: Farming is cyclical, stay positive and focus on your end goals
Key messages
- Look after yourself and those around you. Connect, share the load, you are not in this alone.
- Seek advice, reach out early to your trusted advisors.
- Reach out to peers or farmers around you who have experienced tight times before.
- Remain positive and remember that over the long term, dairying is a profitable industry with many opportunities.
- If you have a sharemilking contract, make sure you discuss options with the farm owner before making any decisions.
Useful links
Tactic #2: Continue to focus on ways to reduce costs within your business
Key messages
- Redo your budget line-by-line, looking for opportunities to remove or defer cost.
- Complete last financial year’s accounts with your accountant as soon as possible so that you can determine any tax liability that may be owing.
- Evaluate any capital expenditure planned for this season. Identify the must-haves vs. nice-to-haves: "Trim the fat not the muscle”.
- Consider running cashflow out 18 months to incorporate future pinch periods.
- Discuss revised expenditure and the implications of that with your farm team so everybody is on the same page.
- Turn any decision on cost reductions into an action plan. Continue to monitor your budget and reforecast as needed if there are further payout revisions. Also look at how your on-farm actions impact your income or expenditure.
Useful links
- Budgeting tools and information
- DairyBase is a useful tool where you can benchmark against other, similar farms to help identify opportunities to control costs.
- Check out Dairy Training Ltd short courses including Business by the Numbers, which is currently free.
Tactic #3: Communicate with your advisors and support people early and often.
Employ a no-surprises policy and get their input to help you make meaningful changes.
Key messages
- Bank
- Get in touch with your bank manager and communicate your position, any overdraft requirements, and discuss any assistance measure they may be able to offer you. Banks like clarity and any changes need to be communicated early.
- Examine your debt repayments and capital vs interest-only repayments.
- Accountant
- Are your 2022-23 accounts complete?
- Do you know your tax position and the tax planning opportunities available to your business?
- Supply representatives
- Discuss your budget and let them know how much you have available for key areas of expenditure. Get them to give you tailored advice on costs and where to get the best return.
- Other advisors
- If you use a farm consultant, reach out and share your position and get their input on how to find efficiencies without compromise.
Useful links
Tactic #4: Establish your options for reducing mating and breeding management costs without compromising results
Key messages
- Establish your non-negotiables around mating and breeding management.
- Talk to your genetics provider around cost and options available.
- There may be options in semen, duration, and terminal sires available at a lower cost.
- Evaluate your pre-mating options around detection and intervention. Discuss options for cost reductions with your vet.
- Evaluate your bull strategy if you use terminal bulls. Think about time they are with the herd, number of bulls needed, and any biosecurity requirements.
- Ensure any decisions or changes don’t impact the long-term goals of your business and that you will still have enough replacements for your herd in future.
Useful links
Tactic #5: Look for efficiencies in your animal health spend
Key messages
- Talk to your vet about costs and options available. There may be options across the year to reduce animal health cost.
- Areas to consider for cost saving include herd testing, vaccines and treatment use, mineral nutrition, lameness and mastitis prevention and treatment. Be proactive in identifying issues and act early to prevent or treat.
- Create a farm policy around the use of vets for callouts and the use of veterinarian products. Communicate this farm policy with your team.
- Consider the long-term animal health, performance, and welfare implications of any decisions that are made.
Useful links
Tactic #6: Evaluate feeding decisions around your farm's pasture and supplements
Key messages
- Explore options around pasture and supplements cost reductions with your farm advisor.
- Focus on pasture management and utilisation. Extra pasture grown and harvested for the same inputs will reduce cost in supplements. An additional tonne of pasture grown and harvested can save you up to $300-$500/ha in operating profit.
- Evaluate your supplement costs. This includes type, amount, and utilisation. Make decisions based on cost per unit of ME.
- Examine your stocking rate and animal performance. Are there any efficiencies that can be made alongside feeding decisions?
- This could include reducing feed demand through change to milking frequency, culling decisions, and young stock strategy.
- Evaluate your re-grassing policy and area. Defer to essential only re-grassing.
- Other options include deferred grazing as a low-cost way of dealing with surplus and as a pasture renovation tool.
Useful links
- Good pasture management is the best way to maintain viability. Improve pasture use with our Pasture Potential Tool or the Spring Rotation Planner.
- Reducing nitrogen fertiliser use
- Improving pasture performance
- Supplement Price Calculator
- FeedChecker Calculator
Tactic #7: Think about the strategic and tactical use of fertiliser
Key messages
- Talk to your fertiliser rep about your nutrient budget and get their ideas for how costs can be reduced while still meeting the feed requirements of the farm system.
- Look at soil testing information and use that data to inform whether further fertiliser application is needed or whether capital fertiliser could be reduced for the short term.
- Think about the strategic use of Nitrogen. How much N is needed for the year for your farm system? Do different areas of the farm require less than others?
- Ensure that timing and placement ensures maximum pasture response from every kg of Nitrogen used.
- Evaluate the cost of Nitrogen and response rates and compare this to alternatives such as imported feed or reduced demand.
- Ensure that any changes or decisions that are made don’t lead to negative environmental outcomes, and that the farm is compliant with any regulations.
Useful links
Tactic #8: Look after your farm team and explore any opportunities for labour efficiencies
Key messages
- Reducing staff can be costly in the long run and put more load on you in the short term.
- Retaining team members who know your farm is key to creating efficiencies.
- Work with your team to investigate opportunities to improve productivity.
- Are there options to manage labour costs, including milking frequency, flexible milking, labour sharing arrangements?
- Think about team wellbeing, especially if there are going to be fewer people to do the same amount of work.
- Always consider the long-term impacts on your business of any changes to your labour structure.
Useful links
Tactic #9: Keep sight of the long-term, plan, monitor regularly and adjust as needed
Key messages
- Examine your decisions around cost management and the impact on the farm system, staff, animals, and your long-term goals.
- Ensure that decisions made in the short term don’t lead to negative environmental outcomes or any issues with regional regulations.
- Preparing for a drier-than-normal summer will also be important, given the arrival of El Niño weather conditions in New Zealand this year and the potential for drought across many areas in late summer.
- Monitor and review budgets throughout the year and communicate this with your trusted advisors.
- Look after yourself and those around you. Connect, share the load, seek advice, and reach out regularly to your trusted advisors and friends, you are not in this alone.
Useful links
Podcast: Coping with cost pressures
Waikato farm owners Bryce Anderton and Aleisha Broomfield share how the current period of increased farm costs and high inflation is affecting them and how they’re coping. Speaking live at Fieldays 2023, Bryce and Aleisha talk about the impacts on their businesses, actions they’ve taken to maintain profitability, the role of cost control, advice for other farmers, and their go-to tools and resources.
Podcast: Managing a profit squeeze (part 2)
How are Kiwi dairy farmers managing their way through the current economic climate to maintain their profitability? In Part 2 of this series, hear from Waikato owner operator John Bluett and Canterbury herd-owning lower-order sharemilker Kylie Marriott. John and Kylie share their approach to coping with cost increases, how they calculate profit from various inputs, how they budget when things are changing so quickly, and what they’ve learned from previous tough times.
Podcast: Managing a profit squeeze (part 1)
How are farmers managing their way through the current economic climate to maintain profitability? In this first episode, we’re joined by farmers Dan King and Marc Jones. Dan and his wife Kate are owner/operators on the West Coast; and Marc and wife Nia are 50/50 sharemilking 700 cows at Mamaku, Bay of Plenty, and contract milking 500 cows in Tirau, Waikato.