Budgeting, Justin and Melissa Slattery (East Waikato)
9 min read
Justin and Melissa Slattery farm in Elstow, prioritising environmental stewardship with efficient resource use. On their 177 ha milking platform, they manage 535 FJX cows. In the upcoming season, they're expanding with an additional 77 ha and will operate two herds, one of which a contract milker will manage. Their vision emphasises leadership in profitability and sustainability. They adjust their budget frequently, use any surplus to reduce debt, and assess their financing yearly. By benchmarking with tools like DairyBase and networking with professionals, they aim for continuous improvement. A key focus is achieving superior environmental outcomes on their farm.
Justin and Melissa Slattery have been on their 100 ha farm at Elstow, between Tahuna and Paeroa for 6 years. Their approach to farming is to be good stewards of the environment through having simple systems that are resource efficient.
The 2023-24 season will be their first with an additional 77 ha, (owned/leased), next door. The business will operate 2 herds through separate sheds but there will be movement of stock and feed between the two areas at times during the year. One farm and shed will be managed with a contract milker.
Business type:
Owner-operator with Contract milker
Location:
Elstow, Southern side of Hauraki Swamp
Farm size:
177 ha effective milking platform
Peak cows:
535 FJX (540 wintered)
PSC:
1/7/2023 MA cows (23/6/2023 Heifers)
Stocking rate:
3.0 cows/ha
Farm system:
3 (11-20% feed imported)
Production:
210,000kg MS/year budgeted, 1186 kg MS/ha 393 kg MS/cow
Production (3 year average):
1,170 kg MS/ha and 390 kg MS /cow
Financial KPI 2023-24 budget | |||
Net dairy cash income ($/kgMS) |
Total farm working expenses ($/kgMS) |
Total operating expenses ($/kgMS) |
Dairy operating profit ($/ha) |
$7.88 | $4.30 | $5.11 | $3,298 |
Physical KPI 2022-23 | |||
Pasture and crop harvested (DM/ha) |
Purchased N surplus (kg N/ha/yr) |
GHG (tCO2 equiv/ha/yr) |
Six week in-calf rate (%) |
15.1 | 96 | 13.6 | NA |
Find out more about these KPI's and how to calculate them for your own farm here.
Numbers at a glance
2023-24 mid-season update as of 17thJanuary 2024.
View/download PDF of updated budget
Financial KPI's | Budget | Updated forecast |
Milk Production (kgMS/ha) | 1,186 | 1,130 |
Milk Production (kgMS/cow) | 393 | 377 |
Net Dairy Cash Income ($/kgMS) | $7.88 | $7.83 |
Total Farm Working Expenses ($/kgMS) | $4.30 | $4.57 |
Cash Operating Surplus/Deficit ($/kgMS) | $3.58 | $3.26 |
Gross Farm Revenue ($/kgMS) | $7.89 | $7.88 |
Operating Expenses ($/kgMS) | $5.11 | $5.42 |
Operating Profit ($/ha) | $3,298 | $2,778 |
Comments and points of interest
Key Points
Production for the season has been revised downwards by 5% following a particularly wet winter and spring.
• Cash operating surplus is likely to be down 13% largely due to the lower forecast milk production and milk price.
• Close monitoring and management of the budget has kept total farm working expenses close to the original budget but there is significant variation for some costs.
Comments
A combination of a wet winter and spring and a slower calving pattern of bought in cows resulted in a revision of the budgeted milk solids down to 206,000 kg from 210,000 kgMS. This has since been dropped to 200,000 kgMS.
The milk price has also been revised down by $0.43/kgMS so the updated forecast for income is significantly down on the original budget, (6%).
Milksolids to end of December is 126,371, (63% of revised total of 200,000 kg). Peak cows milked is 530, (5 down on budget). Losses at calving were a bit higher than budgeted due to metabolic issues in older less sound cows kept to make up numbers. Cow numbers still milking by December 31st were 523.
Daily per cow peak was 2.1 kgMS/cow/day, being fed pasture, maize or grass silage, and PKE/DDG blend.
Supplements fed to date are all the maize and grass silage that was on hand at the start of the season, (150 tDM, 283 kgDM/cow), plus meal through the shed, (PKE/DDG mix, 255 tDM or 481 kgDM/cow). This is as per budget.
The wetter than average winter and spring meant pasture growth rates were down and pasture cover was well under control all spring and early summer. Only 100 bales, (18.5 tDM), of baleage was made late spring which is 30% down on budget, (140 bales).
14 ha maize planted early to mid-November but it went in 3 weeks later than planned because of the wet.
4.5 ha of fodder beet was planted October 10th, again about 3-4 weeks later due to the wet conditions. This means it will be 3-4 weeks later before it is ready to be grazed. To fill the gap 2.5 ha of turnips were planted. The turnips will be grazed from January 25th and should last until mid-February when the Fodder beet will be ready.
The herds have been on twice a day milking but the plan is to put one herd on to 10/7 on 20th January. This will be milking once a day on Sat, Sunday, Tuesday and Thursday and twice a day Monday, Wednesday and Friday. This will take the pressure off the younger cows.
Fertiliser usage is down on budget. It was too wet on the peat so two nitrogen applications were missed in the spring, plus when the payout drop was announced, fertiliser applications were prioritised and most of what has gone on has been applied to the 30 ha purchased this season.
The PKE/DDG mix was able to be contracted at $440 per ton landed which is about $120 less than budgeted. R & M is up with half the increase relating to unforeseen breakage on the new farm and additional drainage being needed on the home farm as a result of the wet winter and spring.
Regrassing and cropping costs are up on budget in part due to the timing of payment for maize harvesting. The 2024 harvest will now be in this financial year.
When the payout drop was announced all farm expenditure was reviewed and we operated a zero budget where all expenditure had to prove a return. This has gone a long way to ensuring that there has been minimal cost creep this year, (forecast total farm working expenses are only about $12,000 up on budget, and this is including paying for 2 years of maize harvest).
Current position
Production is currently 1.3 kgMS/cow/day from 523 cows. Daily total milksolids is behind budget, hence a further reduction in forecast MS for the season. BCS is lighter than target, which is a reflection of the tougher season so far. Feed intakes at present are 17kg DM/cow/day from pasture and 1 kgDM/day from meal.
Current pasture cover is 2,200 kgDM/ha. The herd is on a 25 day grazing rotation.
With a total of 17 ha out in crops the current stocking on pasture effective area is 3.27 cows/ha. Current growth rates are 60 kgDM/ha/day, and with 30 mm rain 15/16 January this should hold for a bit longer. With daily pasture intakes of 17 kgDM/cow/day and 3.27 cows/ha this equates to 56 kg/ha/day, so cover is holding or increasing slightly.
Looking forward
The options for destocking and once a day milking will be considered for later in the season for both herds if growth rates, cover and cow condition drop too much.
There are still 1 to 1 ½ more applications of N for the season depending on the weather, which will be used in the autumn to help increase growth rates and pasture cover.
Current feed on hand available to feed out between now and mid-May is 313 tDM which equates to about 600 kg DM/cow on 523 cows or 5.4 kgDM/cow/day. This will still leave about 150 tDM maize/baleage to take through to next season.
The plan is to feed turnips till mid-February, then fodder beet till drying off mid-May, (this is of course rain and culling dependent). The PKE blend can be fed at higher rates to cover any gaps until the maize is harvested in late March.
All decisions from now on are based on feed budgets and ensuring pasture cover and cow BCS targets are met at the end of the season so that next season is not compromised.
Calving and reproduction
• The calving pattern for the 2023 spring was 85% in 3 weeks, 92% after 6 weeks and 100% by 9 weeks.
• Herd testing for one herd was dropped following the payout and at the same time the decision was made to switch to cheaper heat detection methods.
• Pregnancy testing is planned for early February.
• More AB heifers were born than expected so all 130 have been reared. The plan is to have a good cull of older and poorer producing cows in two years’ time.
• Weaners went off farm on November 20th as planned.
• A total of 16 bulls were purchased for the two herds and the yearlings at grazing. The difference between purchase and sale price will cost about $675/bull. Bulls were removed prior to Christmas and have been sold.
Other points of interest
• High interest rates are hurting but at least they have not risen further.
• Still very concerned about the El Nino forecast and it is looking like the hot dry weather forecasted earlier is starting to appear.
• There are still a lot of maintenance work to do, in particular upgrading the race that connects the two farms so that it can withstand the increase in traffic.
• Riparian planting plans has been put on hold while other more essential bodies of work are carried out.
Strategy and financial
Environment
Farm policy and infrastructure
Feed
Herd
People, health and safety
Budget revision following milk payout drop
Overview
August 15th, 2023
A $1.25 drop in the advance means about $265,000 has disappeared from income. We are going back to a zero budget, where every single expense has to prove a return. Some revisions include:
What advice would you give to farmers who are either first time sharemilking or farm owners?
Update your budgets and go into each month eyes wide open so there are no surprises.
Work out percentage returns for $$ spent. I know it's never an exact science but as a sharemilker anything under 30% on an average pay out is not the focus of your energy.
If you are a first farm purchaser, follow best practice financial management which includes setting and following a budget, monitoring cash flow and sharing with your bank manager. Set a strategy for interest rates etc and work out what the full season looks like.
What words of positivity would you give to farmers planning for the coming months ahead?
The best lessons are learnt in hard times.
We rebounded and purchased our farm post $3.90 pay out because we had managed the low and were ruthless with our spending. Opportunities flow in times like these.
Do you have any tips and tricks for looking after your people on farm?
Make sure you are well, which will allow your team to be happy in their job.
Enjoy the team spirit on the farm. Having a good culture makes farming enjoyable and relieves some of the stress.
Strategies for managing a dry summer
October 23rd, 2023
How has the season been so far?
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?
What strategies do you have this season for when a drought comes early, late, or is prolonged?
Comes early
Monitor feed supply and utilise once a day milking and then early culling to try to balance feed demand with supply. The aim is to try to keep as many cows milking as possible so if the drought breaks early and pasture growth increases there are still enough animals on farm to take through to the late autumn.
Comes late
If a dry spell is later then the herd will be milked on twice a day for longer and culling may be delayed.
Is prolonged
If there is a prolonged drought, the plan would be to go once a day early, cull empties as early as possible and try to keep heifers off the farm for longer, or wintered off so that the pasture cover and cow condition for the next season is not compromised.
The current budget does include $20,000 to purchase silage to extend the crops if needs be. This is an early March decision and coincides with trying to keep the in calf heifers off beyond May. The aim is to extend the grazing of crops eaten until rain comes to protect undersowing and pasture cover for late lactation.
Budget last updated June 2023
INCOME | $TOTAL | $/KgMS | $/COW | $/HA |
Net Milk Sales
This budget is the first season with 2 supply numbers so the deferred income is based on only one production from one farm, 120,835 kg MS @$1.57/kgMS. The advance is based on 120,000 kg MS @ $6.57/kg MS. Income includes a total Fonterra dividend of $0.30/share on 99,900 shares. This is net of the DairyNZ levy of $0.036 /kgMS. *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.
|
1,583,500 | 7.54 | 2,960 | 8,946 |
Net Dairy Livestock Sales
Estimate there will be about 95 MA cull cows and empty R 2 heifers to sell @ $700-$750/head plus about 380 bobby calves @ $30/head. Includes purchasing 24 Jersey bulls, (5 yearlings @ $1,000/head and 19 2 year olds @ $2,000/head). These will all be sold December/January for about $800/head (yearlings) and $1,600/head 2 year olds).
|
71,000 | 0.34 | 133 | 401 |
NET DAIRY CASH INCOME | 1,654,500 | 7.88 | 3,093 | 9,347 |
EXPENSES | $TOTAL | $/KgMS | $/COW | $/HA |
Wages (incl. ACC)
This covers paid wages for one full time staff member to assist owners on one farm, (300 cows), and remuneration for one contract milker with some owner support over calving and at key times, on the second farm, (235 cows). This is net of staff housing, and includes employer contributions to Kiwisaver. The contract milker is responsible for shed and electricity costs for the 235 cow farm, plus the provision and running of a farm bike.
|
180,000 | 0.86 | 336 | 1,017 |
Animal health
The approach to animal health is to be proactive and vigilant. Animal health costs include mineral supplements as required. This is mainly Mg in winter and late spring. Cu levels as per liver tests are normal so supplementation here is not required at present. Zinc supplementation is carried out summer and autumn based on spore count levels published by the vets. Lameness is not an issue on the farm. Mastitis management is based on industry recommended guidelines. Wastage is about 3% deaths and under 10% empties.
|
30,500 | 0.15 | 57 | 172 |
Breeding and herd improvement
This covers 4 weeks of AB with premier sires followed by 8 weeks with leased bulls. 24 Jersey bulls will be purchased, 5 yearlings to run with 129 replacement heifers and 19 R 2 bulls to run with the cows. As there are 2 herds the bulls will be split into 4 teams, and 2 teams rotated with each herd. Herd testing is included with 3 tests, (over 2 milkings unless on once a day).
|
27,900 | 0.13 | 52 | 158 |
Farm dairy
This is for the farm dairy consumable costs for the 28 a side herringbone shed. The contract milker remunerations covers their share of the shed costs for the 22 a side shed.
|
21,100 | 0.10 | 39 | 119 |
Electricity (farm dairy, water supply)
This is the shed and farm electricity for the 300 cow farm, 28 bail herringbone shed.
|
17,600 | 0.08 | 33 | 99 |
Supplements made (incl. Contractors)
Very little supplement is harvested on farm, with spring surpluses managed by dropping paddocks out for cropping. An allowance of $3,500 for about 25 t DM baleage, (10 ha), is included here. (Approximately 140 bales @180kg/bale @ $25/bale).
|
3,500 | 0.02 | 7 | 20 |
Supplements purchased
The budget is for about 370 t (wet), 333 t DM of PKE blend, (with DDG and some tapioca), @ about $560/t landed. Both sheds have in shed feeding systems so wastage is low. This equates to about 620 kg DM/cow.
|
207,700 | 0.99 | 388 | 1,173 |
Calf rearing
About 115-120 replacement calves will be reared. Calves are reared on colostrum/wholemilk twice a day plus meal and hay. They are weaned off meal at 100 kg at about 10 weeks old. Includes bedding and equipment.
|
5,400 | 0.03 | 10 | 31 |
Young and drystock grazing
The yearlings are off farm for 52 weeks and weaners for 26 weeks. This does not include freight.
|
113,500 | 0.54 | 212 | 641 |
Winter grazing
All cows are wintered on.
|
0 | 0.00 | 0 | 0 |
Fertiliser (incl. N)
Focus is on increasing clover performance so that nitrogen application can be reduced. Nitrogen applications will likely be under 120 kg N/ha/year over 5 applications, but are dependent on soil moisture and pasture cover. Product used caries on the time of year and expected rainfall. This spring one application will be in liquid form with progib and sulphur, which has a quicker uptake, so a lower application rate can be used. Fertiliser to be applied is still to be finalised following soil tests on the new farm.
|
120,000 | 0.57 | 224 | 678 |
Regrassing & cropping
This covers the cultivation, seed, planting, weed and pest control and harvesting of 15 ha of Maize for silage, along with the cultivation, seed, planting and weed and pest control of 4.5 ha of fodder beet. In addition this cost includes the regrassing of these areas in the autumn plus an allowance for some remedial regrassing or patching if needed.
|
50,000 | 0.24 | 93 | 282 |
Weed and pest
Weeds are not too much problem. This covers some weed spray and some pest control.
|
1,000 | 0.00 | 2 | 6 |
Vehicles & fuel
Keep vehicles well maintained and try to be efficient with vehicle use. No extra vehicles were purchased with the addition of the second farm. The current tractor and machinery will be shared and so will just work a bit harder.
|
35,100 | 0.17 | 66 | 198 |
R&M (land, buildings, plant, machinery)
Maintenance for this year will just be essentials. The infrastructure on the original farm is now in reasonable shape so just basic maintenance will suffice for this year, particularly if the payout drops. The farm has its own sand pit so race maintenance is relatively low cost.
|
22,800 | 0.11 | 43 | 129 |
Freight and general farm expenses
This includes freight, (on stock sold/purchased and young stock to grazing), protective clothing and bio security levies.
|
12,500 | 0.06 | 23 | 71 |
Administration
Do own financial management, (budgeting and GST), and administration. Accounting costs are low as one shareholder is a qualified accountant. Includes subscription to payroll management package.
|
11,900 | 0.06 | 22 | 67 |
Insurance
Have a higher excess than standard to save premiums and self insure the small stuff where appropriate. Have a $1000 excess on most things. Included under insurance is key person insurance, which has a 13 week stand down to reduce premiums but is good cover if something major happens.
|
15,500 | 0.07 | 29 | 88 |
ACC
Includes ACC for 1 FTE of owners cover and ACC for employees.
|
4,700 | 0.02 | 9 | 27 |
Rates
Council and regional rates for both farms.
|
21,400 | 0.10 | 40 | 121 |
TOTAL FARM WORKING EXPENSES | 902,100 | 4.30 | 1,686 | 5,097 |
CASH OPERATING SURPLUS | 752,400 | 3.58 | 1,406 | 4,251 |
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.
$TOTAL | $/KgMS | $/COW | $/HA | |
Value of change in Dairy livestock
There will be minimal change in number of livestock on hand for the season.
|
1,350 | 0.01 | 3 | 8 |
Labour adjustment
This covers 1.25 FTE of unpaid owner input, including all on farm work, administration, strategic planning and governance.
|
120,000 | 0.57 | 224 | 678 |
Feed inventory adjustment
Feed on hand should not change significantly.
|
0 | 0.00 | 0 | 0 |
Depreciation
Based on previous years financial statements plus allowance for addition of new farm lease block.
|
50,000 | 0.24 | 93 | 282 |
DAIRY GROSS FARM REVENUE | 1,655,850 | 7.88 | 3,095 | 9,355 |
DAIRY OPERATING EXPENSES | 1,072,100 | 5.11 | 2,004 | 6,057 |
DAIRY OPERATING PROFIT | 583,750 | 2.78 | 1,091 | 3,298 |
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.