Budgeting, Medium Input System (South Waikato)

2024-25 mid-season update as of 9thJanuary 2025.

View/download PDF of updated budget

Key Points

• Pasture grown/utilised is up this season due to better weather conditions.
• Milksolids to date is 1.5% ahead of budget and 7% up on last season.
• Supplements fed to date are 17% less than last season.
• The farm is in a good position going into the summer in terms of pasture cover, feed on hand and current daily production.
• Gross farm income is expected to be up about 30% on the budget as forecast milk production and milk price have risen significantly.
• Close monitoring of the cash flow has ensured farm working expenses and operating expenses have increased by less than 10%.
• Planning and provision have been made for a higher tax expense. 
• A 50-50 sharemilker, (the current CM), has been employed for the 2025-26 season. 

Comments

Milk solids to date is 62,700 kg MS which is 4,000 ahead of last season and 1,000 kg up on budget. As a result the budget to the end of May has been revised upwards 3,300 kgMS and the cash flow has been reworked on 90,300 kgMS.
Cow milked during the peak was 218, (milking twice a day), which is slightly up on budget and last year. Losses have been low, (2 cows), so peak cows milked is close to the number of cows wintered. More importantly this number has been milked through till Janaury 9th when 9 cows were culled. Therefore cow milking days to the end of December are up on last season as numbers milking at the same time were down to 211.
The herd peaked in early October at 2.2 kgMS/cow/day and held at over 2.0 kgMS/c/day for most of October
To date 1.4 t DM/ha has been fed to the herd, made up of 107 t DM of PKE, (equates to 441 kgDM/cow). This is lower than last season by 200 kg DM /cow, and is a reflection of the much better pasture growing season this year compared with last year. Overall winter and spring have been drier so utilisation has been much better too.
Baleage made for the season is less than half of what was budgeted, 17 t DM compared with 37 t DM in the budget.
No maize has been planted this season as there is still 150 t DM of maize on hand from the start of the season, and there is plenty of maize silage for sale in the area should more be needed.
Nitrogen applied to date is about 101 kg N per ha (four applications of about 25 kg N/ha), in the form of Ammo 30N, sustain K and urea. The budget was for about 130 kgN/ha for the season so at that level applications are still on track for that. Spring fertiliser has been spread as per budgeted. 
N applied early January to paddocks due for grazing around the 24th of January have shown a good response, so these paddocks should have sufficient cover by then to extend the grazing rotation to 30 + days without affecting residuals.
The second season with the contract milker is working well and has allowed the owner to spend even less time on farm.

Current situation

There are currently 218 cows milking, producing 1.65 kgMS/cow/day, (twice a day) which is up on last season. Herd numbers have been reduced to 209 as at 10th January.
The herd is currently getting 17 kg DM/cow /day made up of 14.5 kgDM of pasture, and 2.5 kgDM of PKE. Pasture appears to have high clover levels this year which is contributing to the current good per cow performance currently. Body condition score is average for this time of year.  
The pasture cover is 2250 kg DM/ha and the rotation length is 21 days. Current growth rates are about 45 kg DM/ha/day which is less than this time last season. At current pasture intake levels this is barely enough to maintain pasture cover. 
The aim is to introduce additional supplements if need be to enable the rotation length to be extended to 31 days by Janaury 24th, by which time the herd will also go to once a day milking.
Somatic Cell count is 21% above last year for the season to date, but is currently below last season on a daily basis now which is good prior to going on once a day.

Looking forward

With current supplements still on hand from last season, and PKE still left from contract, (58 t wet), there is about 160 t DM, to feed out between now and the end of May, plus leave 83 t DM, (380 kgDM/cow), to carry into the next season.
PKE will continue to be fed at 2.0-2.5 kgDM/c/day. At this rate it should last till early April.  The maize still on hand from last season will be started early February and will last until the end of the season. This equates to about 840 kgDM/c/d to the end of May. 
There is still one more application of N, (at about 23 kg N/ha), to come in the late autumn in the form of PhaSed N
Pregnancy testing is scheduled for the 18th of February with 20 cows booked to be culled soon after that. This will bring cow numbers down to about 190. 
A further cull will probably happen early to mid-March to drop numbers to about 180.  
Drying off of young/thinner cows will start in late April depending on feed supply and body condition score. This will leave about 120 MA cows to milk through until drying off on May 20th.
This destocking regime is standard practice for the farm and in conjunction with once a day milking from late January, plus the supplementary feeding programme, works well to enable key targets for cow condition, and pasture cover at the end of the season to be met while still protecting later season production.

Calving and mating

The calving rate for the 2024 spring was 60% after 3 weeks, 86% after 6 weeks and 97% after 9 weeks. This is similar to last season.
The submission rate this spring is 85% from 3 weeks mating. This is up on last season (79%). 
The estimated 6 week in calf rate is 69 % which is up on last season, (64%).
The number of replacement calves born this season was down, with 33 heifer calves reared plus 14 beef animals. This means the number reared was 9 less than budgeted. All weaners went to grazing in late November as planned.
Bulls were purchased rather than leased.  The difference between purchase and sale prices was about $400 per bull, - significantly less than the $700 per head leasing cost.

Other points of interest

Milk revenue for the season has been revised upward by 33 % due to the higher milksolids now expected and a higher milk price compared the original May budget
Total farm working expenses are likely to be up about about 8%.
When non cash costs are accounted for, including the 99 t DM decrease in feed on hand, operating expenses are now $6.15/kgMS.
The main contributors to increases in costs are vehicles, (unforeseen rebuild of tractor head) and additional R & M, (fencing and extra maintenance to get the farm ready for the incoming 50-50 sharemilker).
The increase in cash surplus will enable further debt repayment and cover the provision for higher taxes.

• Mission
  To create long term stability and financial security through dairy farming. Aim to maximise profit through simple, sustainable systems.
  Strive to create win/win situations for all involved in the farm business – for ourselves and farm staff.
• Vision
  Have a well-managed farm that can be managed a contract milker with support from the business owners at key times.
• Values
  Family is number one priority.
  Profit is king.
  Sustainability – systems must be environmentally and personally sustainable.
  A very high standard of animal welfare must be maintained.
• Financial management
  Keep a detailed cashflow, updated weekly, to ensure well informed decisions can be made quickly.
  Continue to prioritise debt repayment which helps mitigate business risk. The level of debt at the end of the 2023-24 season should be about half of what it was in 2018.
  Keep up to date with current research and technology, evaluate and implement appropriate systems early.

• The farm is managed based on a production system 3 with imported feed, (PKE), at about 12-14% of total feed eaten.
• All young stock are off farm from weaning.
• All cows are wintered on farm.
• The farm is of rolling contour with 60% of the farm about 40 m elevation difference from the farm dairy. It is 850 m to the furthest paddock. There a 34, 2 ha paddocks, each with 2 water troughs.
• Milking is twice a day from calving till January 25^th, then once a day until drying off about May 20^th.
• The farm dairy is 20 a-side herringbone, (built 2009), so about 11 rows are milked at peak.
• The dairy yards can hold up to 280 cows so there is plenty of space for 220 cows over winter if cows need to be stood off.

• Fertiliser
  pH is 6.2, Olsen P is 50+ (volcanic soils).
  Fertiliser applied includes 130kg N/ha/year over 6 applications of 23kgN/ha each, from May to January. Depending on the time of year it is in the form of Ammo 30, (urea and Sulphate ammonia mix), in the early spring, SustaiNK mix, (23 kg N/ha and 25 kg K/ha), or urea.  The autumn fertiliser applied is a mix of N, P and Mg.
• Effluent management and use
  The farm has stirred storage tanks that can hold thirty days of effluent.
  Effluent can be sprayed on to 17 ha, (about 25% of the farm). Contour limits how much of the farm can be used for effluent.
• Riparian planting
  6 ha of the farm has been fenced off and have been planted.
  Some steeper areas of the farm have been identified to be retired in future.
  
• Waterways
  The majority of waterways are fenced with just a few minor drains left to do.

• Pasture management
  The key to a simple profitable system is to maximise pasture utilisation. Pasture cover and growth rates are monitored throughout the year, with the spring rotation planner used through calving and into the early spring.
• Supplements purchased
  About 140 t PKE (126 T DM), is fed all season from 2-4 kg DM/cow/day depending on time of the year, grazing residuals and weather.
• Cropping
  Usually, 3-4 ha of maize, (130-140 days maturity), is grown each year on the effluent block. This helps shift surplus feed from the spring to the autumn and removes excess fertility from that area.
  Traditional cultivation is used.
  The yields are about 60 t DM, which is fed as maize silage mainly in the autumn. About 20-30t DM is carried through for use in the spring or late summer if needed.
  For the 2023-24 season it is unlikely any maize will be grown as three times as much supplement is on hand at the start of the season than is usually taken into the winter. The wet summer and autumn of 2023 meant none of the 2023 maize crop was fed out and a lot more baleage is also still on hand.
• Supplements made
  Approximately 40 t DM of baleage, (220 bales), is made, using contractors for all the work.

• Breeding and herd testing policy
  AB is for 3 1/2 weeks using A2 semen. The majority of the herd is mated to dairy breeds although a few lower BW cows or likely culls are mated to beef semen.
  2 bulls are run with the herd for another 6 weeks to give a 9 1/2 week mating period. 2 bulls are leased to be used over the R 2 heifers.
  There are no intervention treatments used over mating. 
  Herdtesting is 4 times a year - usually twice with 2 milkings and then 2 tests over 1 milking, (after January when the herd is on once a day).
  All replacement calves are DNA tested.
• Animal health
  Mineral supplementation is via drenching from calving till late November (Mg and a probiotic), Se via drench November and January, plus a Se injection in the winter.
  Heifers are given copper, (Cu), when they return to the farm. No other Cu supplementation is given as the milkers get PKE all year and this is high in CU.
  Drenching with zinc for facial eczema starts in late January.
  The herd SCC averages 129,000 for the 2021-22 season. High SCC cows are treated with longer acting dry cow at drying off. The rest of the herd is also blanket treated with short acting dry cow antibiotic.
• Young stock policy
  Replacement rate is about 20% with 43 calves reared in the 2023 spring.
  Calves are reared on milk and meal and go to external grazing late November. About 8 beef animals are reared each year and go to the owners off farm property in the Bay of Plenty
  R 2 heifers return to the milking platform May 1^st.

• The farm is set up to be able to be managed by one full time person.
• The 2023-24 season will be the first season with a contract milker.
• The farm owner will provide on farm support at key times.
• The farm is compliant for all health and safety requirements.

Overview

A focus on debt repayment in the past nine years has given our business the resilience needed now to cope with this downturn in payout. The latest drop translates into $105,000 being lost from expected income.
We have revised our budgets, and cashflow forecast, using a $5.20/kg MS advance, ($6.75 /kg MS final payout). This has shown that:

• We needed to revise our provisional tax payment schedule, as our first installment, (already paid), should cover the entire seasons liability, which significantly helps the bottom line
• Our cost structure is relatively streamlined, R & M will be cut to absolute essentials, but at this stage there is very little else we will reduce
• We have some reserves, which could be used if need be.

What advice would you give to farmers who are either first time sharemilking or farm owners?

Don't bury your head in the sand! Revise your budgets as soon as there is any change in payout. Just understanding the impact on your bottom line will help you feel in control. You will be able to make better decisions once that is done.

Maintain good communication with your banker and accountant.

What words of positivity would you give to farmers planning for the coming months ahead?

Costs at this time of year are largely essential, so don't make any rushed decisions on cutting spending. Focus spending on areas that make money.

Concentrate on getting the basics right; Follow the spring rotation planner and keep doing your feed budgets.

Do you have any tips and tricks for looking after your people on farm?

Good communication is key so staff understand what impact the lower payout is having on the farm plan and what the new plan looks like.

2023-24 mid-season update as of 17thJanuary 2024.

View/download PDF of updated budget

Key Points

•    Forecast milksolids has been revised upwards by 2.3% after an average growing season and more supplements fed to date.
•    The farm is in a good position going into the summer in terms of pasture cover and feed on hand.
•    Gross farm income is expected to be up about 11% on the budget revised in August as forecast milk production and milk price have risen.
•    Close monitoring of the cash flow has ensured farm working expenses and operating expenses have stayed close to budget.

Comments

Milk solids to 31-12-2022 is 55,967, which is 9% ahead of last season and budget. As a result the budget to the end of May has been revised upwards 2,000 kgMS and the cash flow has been reworked on 86,500 kgMS.
Cow milked during the peak was 215, (milking twice a day), which is on budget and similar to last year. Losses have been low, (3 cows), so peak cows milked is close to the number of cows wintered.
Rainfall to date has been just above average but reasonably well distributed. It was quite windy in December and although a bit drier, it was very cloudy which affected sugar content of pasture and growth rates of crops.
Pasture growth rates have been average for the season. The DM % has often been higher than last year and this has helped increase utilisation. 
To date 1.69 t DM/ha has been fed to the herd, made up of 104 t DM of PKE and 34.4 t DM of baleage from inventory, (equates to 641 kgDM/cow). This is up on last season.
Baleage made for the season is half of what was budgeted, 20 t DM compared with 40 t DM in the budget.
The area of maize planted is 1.8 ha, (on budget). It was planted November 4th, about 7 days later than target. The cooler and cloudy weather through November and December slowed growth rates so the crop is behind in development compared with normal.  With the recent hot sunny weather it has taken off, the awns are up and the aim is now to harvest in mid-March. Yield is still on target for about 19-20 t DM/ha.
Nitrogen applied to date is about 87 kg N per ha, in the form of Ammo 30N, Ammo 36, sustain and urea. The budget was for about 130 kgN/ha for the season and that is still on track for that. Spring fertiliser has been spread as per budgeted. 
The first season with the contract milker is working well and has allowed the owner to spend less time in the shed which was one of the reasons for moving to this arrangement. Other farm work such as fertiliser spreading and maintenance are still done by the owner so there are still regular visits to the farm.

Current situation

There are currently 211 cows milking, producing 1.54 kgMS/cow/day, (twice a day), although the previous 10 day average was 1.6kgMS/c/day. They have dropped with the recent hot weather. This time last year they were on once a day milking and averaging 1.4 kgMS/c/day.
The herd is currently getting 18.5 kg DM/cow /day made up of 16 kgDM of pasture, and 2.5 kgDM of PKE. Body condition score is average for this time of year.  
The pasture cover is 2300 kg DM/ha and the rotation length should be at 30 days within a couple of days. Current growth rates are around 50-55 kg DM/ha/day. At current pasture intake levels this is just enough to maintain pasture cover. 
Another round of N at 23 kg N/ha is going on over the next couple of weeks, (sustain 25 K), to also help keep a feed wedge ahead of the cows with the longer rotation. This will bring applications to date up to about 107 kgN/ha.
Somatic Cell count has been a lower than last year but has just risen in the last couple of days. This Efforts are being made to identify the source before going to OAD later this week.
Zinc supplementation has just started at low rates.

Looking forward

With current supplements still on hand from last season, PKE still left form contract and maize yet to harvest there is 114.6 t MD to feed out between now and the end of May, plus leave 69 t DM to carry into the next season.
PKE will continue to be fed at 2.0-2.5 kgDM/c/day. At this rate is should last till early April.  The maize still on hand from last season will be started around mid-February and will last until the end of the season. This equates to about 570-600 kgDM/c/d to the end of May. All the baleage on hand plus this season maize will be carried through to next year.
There is still one more application of N, (at about 23 kg N/ha), to come in the late autumn. Autumn maintenance fertiliser is also still to go on.
Four cull cows are going this week which bring numbers to 207 to milk through until mid-February which is when pregnancy testing is scheduled. Cow numbers will be reviewed then and depending on pasture growth and feed supply more culls may go to bring numbers down to about 190. 
A further cull will probably happen early to mid-March to drop numbers to about 180 and a final cull will happen on April 20th.  At this time all the first calvers will also be dried off. This will leave 120 MA cows to milk through until drying off on May 20th.
This destocking regime is standard practice for the farm and in conjunction with once a day milking from late January, plus the supplementary feeding programme, works well to enable key targets for cow condition, and pasture cover at the end of the season to be met while still protecting later season production.

Calving and mating

The calving rate for the 2023 spring was 60% after 3 weeks, 86% after 6 weeks and 99% after 9 weeks. This is similar to last season.
The submission rate this spring is 79% from 3 weeks mating. This is up on last season (72%). 
The estimated 6 week in calf rate is 66 % which is up on last season, (64%).
The number of replacement calves born this season was down, (only 39), so an additional 9 calves were purchased from a neighbour to give 48 calves replacement calves reared. This means the number reared was actual 5 more than the 43 budgeted. All weaners went to grazing in late November as planned.

Other points of interest

Milk revenue for the season has been revised upward by 11% due to the higher milksolids now expected and a higher milk price compared the revised budget form August 2023, (post payout drop). 
Total farm working expenses look to be on track, (currently showing about a 1% variance). With the revised milksolids of 86,500 kg, forecast FWE will drop slightly from $5.41/kg MS on 84,500 kgMS to $5.36/kgMS.
When non cash costs are accounted for, including the 54 t DM decrease in feed on hand, operating expenses are now just under $6.00/kgMS.
Farm working expenses have stayed close to budget for most categories, which is not surprising as the budget was revised in mid-August and more purchases had been committed to by then so there was more certainty about price.
Despite the drop in expected cash flow there is still sufficient surplus to enable further debt repayment and capital investment
Other work on farm is limited to essential jobs only to ensure there is no cost creep.