Budgeting, High Input System (South Waikato)

View/download PDF of updated budget

Key points 

•    Milk production for the season was marginally down on last season, (< 1%), but was 7% behind budget.
•    BCS at calving was below target which impacted early season production and this deficit was not recovered despite good summer and autumn pasture growth.
•    Total farm working expenses are slightly lower than budgeted, (2%), but over lower milk solids FWE/kgMS are $5.38/kgMS which is up 5%.
•    Pasture harvested for the 2023-24 season is about 14.1 t DM/ha, which is 3% down on the previous year.

Comments

Production for the season is 125,435 kg MS which is just 651 less than the previous year. Peak cows milked is 290 as per budget with losses for the season low at only 2. The herd peaked at 2.00 kgMS/cow/day for 11 days, in late September/early October.
All R 3 and any at risk cows went to once a day milking April 10th, and 25 culls went to the works in early April. The remaining 265 cows were milked through till drying off on May 16th. 18 empty cows were sold as in milk cows late May and 3 cows were sold as budget cows.
With hindsight the herd was probably milked for about 5 days too long last season, which reduced supplements carried into the winter and impacted pasture cover at the end of May 2023. 
Winter grazing for 25 cows for 2 months was secured to help reduce feed demand on the farm over the winter, so that pasture cover could be increased more quickly.  With cover still behind target as calving approached, feeding levels for the cows were restricted. This meant that they were not on a rising plane of nutrition and cow body condition score was lower than target at the start of calving. 
This compromise impacted milk production in the early part of the season and this lost production was never regained. 
Reproductive performance was also affected with the 3 week submission rate at 78%. 
The calving rate for the first 3 weeks was slower than last season so fewer days in milk has also contributed to some of the lower milksolids to date.
Supplements fed for the season of 1,963 kgDM/cow is up on the previous season with most of the increase coming from the first half of the season.
The amount of supplements made on farm this year was 12 ha of silage, (30 t DM). This is nearly double last season when only 16 t DM was harvest. There were better harvest windows for making supplement and though the peak growth was a little later there was a good surplus.
Despite relatively low soil moisture levels there has been good summer and autumn growth, with small amounts of rain coming at just the right time to keep pasture growing. It was not as hot as the precious summer/autumn and there less wind so what rain did fall was more available for the pasture.
Milk income was on target with a higher milk price offsetting the lower than budgeted milksolids.

Current situation

There are 270 cows on farm with 25 again at winter grazing, (left farm early June).
Pasture cover is 2400 kg DM/ha. This is well on target for calving in 3 ½ weeks time.
Body condition score now, (mid-June) is 4.6-4.7, again much improved on this time last year.

Calving and reproduction

•    The calving rate for 2023-24 was 62% of the herd calved in 3 weeks, 87% in 6 weeks and 99% in 9 weeks. This is behind last season which was 67%, 80% and 100% respectively.
•    The 3 week submission rate for 2023-24 is 78% which much lower than last season, (80%). 
•    The six week in calf rate is 73% (Actual), this is up on last season (68% E).
•    The not in calf rate is 12-13%.
•    69 replacement calves were reared which is as per budget.

Other points of interest

•    The average cost of PKE for the season finished $10 below budget at $320/t. Purchased more PKE so total feed costs was similar to budgeted.
•    Maize costs of $340/t DM were well down on the budget so even though 10 t DM more were purchased total cost for maize was down on budget.
•    Finished the season with 26 t DM more supplement on hand so total net feed costs for the season are $1.88/kgMS which is 35% of FWE of $5.38/kgMS. Fencing costs are up this year as one third of the farms’ fencing is being replaced due to its age. In addition, about 1 ha of steep land was fenced off for riparian planting.
•    Calf rearing costs are up as this year the decision was made to rear calves on 50-50 mix of whole milk and milk powder.  The cost to the owner was neutral, but it meant the contract milker was better off as more milk was sent to the factory.
•    Payments to the contract milker are down 7% with the reduction in forecast milksolids.
•    Dairy shed costs are up due to repairs needed to the chiller fan and the water cooler pump.

Strategic plan
Have a very profitable business based on a high input system that is implemented to a high standard.
Minimise waste, (in any form), from the system through application of good management of the system e.g. cows, (empty & losses), feed, minerals, pasture, effluent.
Have a system that consistently delivers excellent physical and financial KPI’s irrespective of season and pay out.

Financial
Deliver very good cost control, specifically around the use of basic, lower cost, feed inputs.  Manage the budget to identify the minimum requirements to generating high production.
Analyse and benchmark the system to identify opportunities for improvement i.e. high profit will come from executing the current system well rather than chasing the ultimate system.
Continue to use surplus cash to strengthen the financial position of the business.

• The farm system is set up to optimise the amount of feed grown and harvested based on best practice pasture management, running the correct stocking rate and calving date, and economic use of imported feed to maximise days-in-milk.
• Success relies on frequent monitoring of feed budgets, pasture growth rates, cow condition and feed prices to ensure optimal use of pasture grown and efficient and profitable use of imported feed.
• The 24 aside herringbone dairy shed and effluent system are 8 years old. The shed is 0.7 km from the furthest paddock.
• The farm is rolling hill country typical of the Putaruru area, with 50% of the milking area having about a 20 m difference in height from the dairy shed.
• Facilities include a feed pad and feed storage, (for silage stacks), near the dairy shed. This minimises time and costs related to feeding out and also minimises wastage associated with storage and feeding of silage.
• Races, fencing and water supply are all in good order and regularly maintained. The policy is to undertake repairs and maintenance when milk prices are favourable. To do so ensures infrastructure and resources remain in good order.

• Pasture
  Pasture and crop eaten has increased to 14.9 t DM/ha in the past 7 years.
  The policy is to fully utilise pasture first.
  The aim is to utilise all nutrients from effluent to significantly reduce purchased fertiliser.
• Feed policy
  Avoid using high cost inputs and focus on low cost, high energy supplements and use the farm as a protein source rather than buying in expensive supplements.
  In addition, minimising wastage of purchased feed is very important so a high level of attention is placed around stack and storage management, feeding out and getting the daily input levels correct.
• Supplements purchased
  About 590-610 t DM of imported supplement are used. This equates to 2000-2100 kg DM per cow. Maize silage makes up just over 50% of the imported feed and PKE makes up just under 50%. A small amount of pasture silage may be purchased if readily available. The balance between maize silage and PKE could change depending on relative prices and final yields for the maize, (the purchase is based on hectares so if yields are down then imported maize silage will be down).
• Supplements made on the milking platform
  Surplus pasture is made in to silage.  The amount can vary each year but is usually around 40-50 t DM per year.
• Young stock
  Calves leave the farm December 1st as weaners and return to the farm May 1st as in-calf heifers. The grazing costs include freight and all animal health costs including zinc. PKE fed will be fed at no extra charge if required. Provision of bulls for mating is also included in the price.

• The farm implemented a cross breeding policy six years ago which now means the herd is 70% cross-bred and 30% Friesian. The breed change was part of a programme to target rising not in calf rates which got as high as 19%. After seven years the not in calf rate is 11-13%. The target now is on achieving a less than 10% empty rate from an 11 week mating.
• AB is for 5.5 weeks. Herd test 4 times per year one milking only. Six bulls are purchased or leased each year to use with the herd after AB is finished.
• The heifers are mated to start calving a week earlier than mature cows. 
• First calvers and thinner younger cows are milked once a day from late March/early April to protect body condition.

• The farm is managed with a contract milker, plus relief milker equating to 1.6 FTE. The contract milker’s remuneration covers their share of shed, power, farm bike and communication costs as well as a calf rearing allowance.
• The farm owners unpaid input is for 0.1 FTE for the year. Owner input includes about two part days a month on farm as well as time spent on governance and administration for the business. 

• Soils and fertility
  The farm soil type is a well-drained volcanic (allophanic) soil. The Olsen P levels are 30 on non-effluent areas, (35% of the farm), and 50 on the effluent area. The pH is 6.0.
• Fertiliser and nitrogen
  The effluent area gets 90 kg N per ha over the whole year and the non-effluent area gets 120 kg N per ha. Fertiliser applied is urea, PhasedN and sulphur depending on the time of year and the soil conditions.
  Fertiliser applications are based on soil test results and are consistent with maintaining soil fertility at economic optimum while minimising losses.
  August and September fertiliser and nitrogen for the whole farm is now applied by helicopter, as is the autumn fertiliser for the non-effluent area.
  Contour and soil conditions in the late winter and early spring mean that a much better coverage can be achieved with the helicopter. The contour of the non-effluent area is difficult to evenly spread fertiliser using land based spreaders so using a helicopter on this land gives more efficient use of fertiliser.
• Effluent
  65% of the farm is spray irrigated with effluent.

*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.

Click here for PDF of 2021-22 budget v actuals

Comments

• Production was up 1.8% on budget by early January but finished and 1.6% down for the whole season. The hot and dry late summer and autumn weather impacted pasture growth rates. It was difficult to maintain pasture cover and cow condition. The season ended about one week earlier than usual with the last milk sent, (from 175 cows), on May 19th.
• Pasture and crop eaten for the 2021-22 season is estimated to be about 13.3 t DM/ha which is 8-9% down on last season. Supplements fed for the season of 693.2 t DM are 10% up on budget.
• The milk price was $1.79/kg MS higher than budget, which more than made up for the lower than budgeted milksolids. Farm working expenses were $0.50/kg MS up on budget, half of this increase was due to the purchase additional supplements and winter cow grazing. Fertiliser price rises accounted for another 0.07/kg MS.
• The estimated operating profit for the season is $7687/ha which is 55% higher than the budget estimate and is largely due to the increase in milk price received. Limiting the increase in operating expenses to below $0.50/kg MS, or 10%, is a good achievement, given the season and the high level of inflation.

Other points of interest

• Silage made on farm was 13 t DM which is well below the budget of 40 t DM. An additional 58 t DM of silage was purchased at $420 per t landed that was not in the budget. This helped make up the shortfall in home grown silage.
• The amount spent on maize and PKE was similar to budget but the balance changed, with 79 t less of PKE, (wet), and 75 t DM more of maize being purchased. The rising price of PKE was one reason for not contracting to buy more than the original 288 t, and to make the switch to purchasing more maize.
• The younger cows were put on to once a day milking in early March, which was one week later than the previous season. 100 early calving, younger and lower BCS cows were dried off on May 7th.
• Pasture cover at drying off was 300 kg DM/ha below the 2,400kg DM/ha target. Cow condition was also lighter than usual for that time of year. Additional supplement feeding through June along with sending some of the herd off farm to winter grazing has helped to improve both pasture cover and cow BCS at planned start of calving in early July. Pasture cover was 2250 kg DM/ha and BCS was 4.8 for the herd and 5.5 for the in calf heifers.
• The not in calf rate is 14% which is higher than last season, (11%). The 6 week in calf rate is 69%. Again down on the 20-21 season figure of 73%.
• N applied for the season was 113 kg N/ha which is on budget.

*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.

Click here for PDF of 2019-20 budget v actuals

Comments

• Our farm system relies on frequent monitoring of feed budgets, pasture growth rates, cow condition and feed prices to ensure optimal use of pasture grown and efficient use of imported feed. This attention to detail means that there is usually very little variation between budgets and actual performance each year. The 2019-20 season was no different.
• The 2019-20 season progressed pretty much as planned. Production was up 1% on budget and profit per - estimated to be $4,050 per ha, is 2% up on budget.
• Milk price received in the financial year was $6.95 ($0.32 up on forecast) and largely contributed to the net dairy cash income being $53,000 up on budget. Farm working expenses finished at $4.13 per kg MS which was $31,507 up on budget. Most costs were close to budget, with the main variances coming from the purchased feed, fertiliser, R & M and vehicles categories.

Other points of interest

• The good late winter and spring meant that 60 t DM of maize silage was carried over from the start of the season and 20t DM more grass silage was made on farm so supplements going into the summer was up 281 kg DM per cow.
• The summer and autumn were drier than usual but not to a great extent. The extra feed taken into the summer went a long way to offsetting the reduced pasture growth rates caused by the dry weather.
• The dry weather did impact the yield of the 14 ha of Maize purchased. As a result maize costs were down 12% but PKE costs were up 8%. The extra PKE had was contracted earlier in the season so rising spot prices did not impact the price per t.
• Cow wastage was low this season (only 1 death in the spring), so the number of culls for sale was up on budget.
• As a result of the lower wastage early in the season peak cows milked were up on budget so animal health costs were up by a corresponding amount.
• The not in calf rate for 2019-20 was 11.1%, (based on pregnancy test results). The 2018-19 rate was 13% so the improvement is pleasing.
• Replacement heifer calves reared were 13 less than budget which meant that weaner grazing costs were below budget.
• N applied was on budget with 90 kg N per ha applied to the effluent areas and 120 kg N per ha applied to the non-effluent areas.
• R & M costs were up 40% as the budget had not factored in work done on farm houses to upgrade the insulation.
• Vehicle costs were up 70% as a result of 2 larger tractor repairs that were not planned.

Feed situation

• % still milking: 89% (last 15 culls going 12 May).
• Dry off date: Main herd about 20/05/20, 10-15 cows needing long acting DCT 11-12 May.
• % Milking area regrassed: 8.6% of farm (6.5ha undersowed).
• N applied this autumn to date: 32kg N/ha as phased over the whole farm applied last week in April, just before the last good rainfall.
• Planned N application to end of month: 0

Actions taken to address the feed shortage

• The good late winter and spring meant that 60t DM of maize silage was carried over from the start of the season and 20t DM more grass silage was made on farm so supplements going into the summer was up 281kg DM per cow.
• The summer and autumn have been drier than usual but not to a great extent.
• The biggest impact of the dry conditions has been on the yield of the 14ha maize purchased.
• The season has progressed very much as planned – Maize silage purchased was down 12% (50t DM) and PKE imported up 8%. The PKE had been contracted earlier in the season so the extra purchased was not affected by rising spot prices.
• The young cows went to once a day in early April as per normal.
• Culls went in April in two lots. There was minimal delay in getting stock away when planned.
• N was applied to the whole farm as soon as moisture and soil conditions were favourable.

Plans to achieve target APC and BCS and PSC targets

• Our farm system relies on frequent monitoring of feed budgets, pasture growth rates, cow condition and feed prices to ensure optimal use of pasture grown and efficient use of imported feed. This means this season we are tracking as any other year.
• The key is to be on the right round length now and build up cover while we can. Current rotation length is 60 days, daily pasture requirements are 30kg DM per ha per day (and will decline with culling and drying off), so growth rates of 40-50 pasture cover should see an increase 200-400kg DM per ha by the end of May as cow demand for pasture declines with drying off.
• It is critical to act early as a delay will cost more feed to achieve the same results but with higher costs.

Concerns and plans for the upcoming weeks

• No main issues. By 15 May the milking herd will be down to 230 and the SR will be at 3.96 so demand on the farm will be less.
• BCS is a little lighter than usual but there are sufficient supplements on hand to address that prior to calving.
• Supplements on hand at the end of May is similar to this time last year.

^{*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.}

^{Click here for PDF of 2018-19 budget v actuals}

Comments

• This was definitely as season of 2 halves. The early part of the season went well and by December the cash flow was on track as per the budget. Production was on budget with 13% less supplements fed.
• The prolonged dry period from mid-January to late April had a big impact on the light volcanic soils and production finished 5,965 kg MS, (4.7%), behind budget, and feed costs were up.
• The estimated operating profit for the 2018-19 season is $3,531 which is 13.7% below budget.
• Milk revenue was down due to the lower milksolids but this was offset slightly by a higher than budgeted milk price received - $6.52 per kg MS actual was $0.09 higher than budget.
• Livestock revenue was lower than budgeted due to fewer cows being sold and a lower-than-budgeted price received. Closing MA cow numbers were up on budget as the plan is to milk 15 more cows in 2019-20 so the lower cash income is offset by a higher than budgeted value of change of livestock numbers on hand at the end of the season.
• Total farm working expenses were $28,160 up on budget, (5.6%), but when the lower milk production is taken into account costs per kg MS, (FWE), were $4.36, (up 10.8%).
• Most of the variation in costs from the budget were due to additional feed purchased to fill a feed deficit due to the drought and to increase the feed on hand for next spring and the planned increase in cow numbers to be milked.
• Operating costs for the year were 7.2% up on budget after taking into account the additional maize on hand for next spring.

Other points of interest

• Mating went well, with improved heat detection and timing of mating through using heat detection patches.  This has given more certainty to heat detection and better timing of insemination. The result was more cows mated to AB than budgeted.
• Reproductive performance of the herd for 18-19 was still disappointing. There was a slight improvement in submission rate but a higher than expected return rate meant that the 6 week in-calf rate was only 58%. The non-return rate for the year is 13% which is marginally better than the previous year.
• Supplements fed for the year were 237 t DM PKE and 378 t DM Maize. This equates to 2.28 t DM per cow which is 8% up on budget and 17.5% higher than the 17-18 season. An additional 50 t DM of Maize was carried forward for spring 2019.
• Nitrogen applied was 138 kg N per ha average over the whole farm. This compares with 132 kg N per ha for 2017-18.
• The last of the herd was dried off on 18th May which is a few days earlier than usual.
• As at the end of June the average pasture cover is now 2,650 kg DM per ha and the herd is all in calving condition (BCS of 5.0 for mature cows and 5.5 for R 2 heifers).