Budgeting, Tatua Supply Farm (East Waikato)

• Mating 2023 was affected by the LIC batch semen issues which resulted in a 63% 6 week in calf rate for the 2024 calving.
• The resulting very spread out calving has meant that despite a great winter and spring production is only slightly ahead of last spring, (which was very poor).
• It is estimated that the slow calving has cost about 2,000 kg MS so far this season.
• To tighten the calving spread, for the 2024 mating, more CIDR’s have been used, along with using frozen semen to minimise the risks of semen failure, so animal health costs and breeding costs for the 2024/25 season might increase.
• 3 week submission rate this season is 95% with about 35 CIDR’s used, (about 20% of the herd treated). Return rate so far is looking good.
• Total farm working expenses are estimated to be $6.02/kg MS which is slightly lower than last season, ($6.16/kg MS), from similar milk solids production of 97,000 kg MS.
•  Less maize has been planted as there is still a significant amount of maize silage on hand from last season. A result of taking more maize into the winter and using less due to the good weather conditions through the winter and early spring.
• R & M costs are about $10,000 up on earlier budgets due to some unplanned spending relating to a freak tornado plus some extra work carried out to improve safety in the cowshed.
  - A tornado flattened a calf shed prior to calving, and while insurance covered replacing the shed, additional costs were incurred updating the race and access to the new shed.
  - AB stock handling facilities were upgraded prior to mating to ensure stock handler safety.
  - Safety covers were fitted to the milking machine slide pulsators.

• Vision
  Grow our wealth while remaining both profitable and sustainable.
  Provide for family.
  Spend more time with family.
• Values
  Family - "people in the house are more important than the farm".
  A balanced lifestyle.
  Great animal health.
  Love of land. A high standard of environmental outcomes is important.
• Financial management
  Focus on debt repayment to keep the balance sheet strong.
• Relationships
  Maintain strong relationships with personnel and organisations that are key to the success of the business such as young stock grazier, bank and accountant.
• Community involvement
  Started the initiative for riparian planting with the Piako Catchment forum.
  Involved in Piako Catchment forum.

• Environmental metrics
  Enteric methane emissions and purchased N surplus are calculated each year and benchmarked against other Waikato farms.
  The farm has lower methane emissions and higher profit compared with the average Waikato farm. It is operating efficiently with high MS/cow and with currently technology there are few options to reduce methane emissions further without reducing profit.
  Purchased N surplus, (PNS), is slightly above average compared with similar higher profit farms so the farm system is continually being reviewed to identify opportunities to reduce this metric. Options could be to more efficient with nitrogen use to reduce inputs, feed more maize silage and less PKE.
• Fertiliser
  Olsen P levels are 31-61 and pH levels are 5.7-6.1
  N applied is about 130 kg N/ha over 66 ha, (so includes N applied to the 8 ha of maize grown). Applications are at 25 kgN/ha, and there are 5-6 applications per year depending on pasture growth, soil moisture and weather conditions. Products used are N rich urea or PhaSedN.
  Spreading contractors have GPS precision spreaders.  
• Effluent management and use
  Effluent is applied to about 2/3 of the farm.
  There is 90 days storage. Diversions are in place for rain water off the shed roof but not for the feed pad.
  The effluent irrigation system is fitted with a full fail safe system which shuts off the system if there are any breakdowns.
  It also is fitted with a flow meter which limits application to less than 9 ml/ha.
  Effluent is tested for nutrient levels, which shows that 10 mls/ha applied is equivalent to 35 kg N/ha. Additional nitrogen applications are made to the effluent irrigation area but only 6 weeks after effluent has been applied. Total N applied to the effluent areas is monitored to ensure rates applied do not exceed recommended levels.
  The effluent irrigator is operational all year round because of the feed pad.
  Riparian planting
  4.5 ha is planted in natives.
  Planting along significant waterways allows for a 10 m setback.
  Shelter belts are planted with native shelter belts using a mix of cabbage trees, ribbonwood, pittosporum, kanuka and some flax.
• Waterways
  All waterways are fenced.

• The farm system is a 3/4, peak milking 210 crossbred (F10-F12),
  stocked at 3.2 cows/ha and supplies Tatua.
• The farm business is managed with a contract milker and 0.1 FTE of unpaid owner input.
• Effluent is spread over 2/3rds of the farm.
• Calving starts 5th July MA cows and 29th June for heifers.
• In a good autumn, cows are milked to mid May with a 6-week dry
  period.
• High standard of calf rearing, all colostrum milk is tested
• The farm has excellent infrastructure: 20 a/s HB shed, Halo monitors
  water and effluent; green wash for the yard; feed pad, with matting;
  batch latch.
• The feed pad with matting is a great asset as the farm can flood
  allowing for cows can be stood-off and fed on the feed pad up to 22
  hours a day.
• Maize is grown on farm and PKE imported. Maize and PKE, (via auger
  bucket), are fed on the feed pad.
• Recent very dry summers have required more feed to fill the large
  feed deficit.
• Cows are milked OAD in January when at 15 l/cow.
• Plantain has been trialed in the pasture, to help to mitigate N losses.
• A comprehensive regrassing programme helps to maximise pasture grown.
• Replacement calves are grazed off from 6 months of age.  Yearlings are off for 12 months from June 1st to May 31st.
• First calvers are milked once a day for their first year to allow them to fully grow to maturity.

• 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 220 t PKE, (198 T DM), is imported each year.
• Cropping
  8 ha of maize is grown each year, using conventional tillage.
  The yields are about 22 t DM/ha.
  Maize is fed on the feed pad along with PKE.
• Regrassing
  Pasture renovation includes regrassing the maize areas after harvest with permanent pasture.
  Each year paddocks are ranked 1-5 on performance. The worst, (ranked at 1), are earmarked for next year's maize crop and under sown with annual rye grass in the autumn, any ranked 2 or 3 are under sown with permanent pasture and any areas that have been affected by drought, pugged or insect damaged areas are also repaired.
  One third of the farm is broadcast with plantain each year which results in about 20% of the sward being plantain in year 1, 10% in year 2 and 5% in year 3. This helps to mitigate N losses.
• Supplements made
  Approximately 36 t DM of baleage, (200 bales), is made using contractors for raking, baling and wrapping.

• Breeding and herd testing policy
  Mating is for 12 weeks with the last 3 weeks using short gestation, (SG), dairy semen, to give a 10 1/2 week calving period.
  The first 6 weeks are with AB using premier sires/genomically tests bulls, plus some short gestation beef bulls on the lower 20% BW/PW cows.
  Bulls, (4 leased), are rotated with the herd for 3 weeks before finishing mating with the 3 weeks of SG AB.
  Another 4 bulls are leased to run with the heifers.
  About 7-10% of the herd is treated for anoestrous using CIDR's.
  DNA testing is done on the replacement heifer calves.
  Herd testing covers 3 test over 2 milkings each, unless the herd is on once a day milking, (OAD).
• Animal health
  Animal health philosophy is to follow best practice guidelines to ensure a high level of animal well being. Preventative treatments, observation, quick response and good record keeping are key for this. Cow manager technology is used to assist with this.
  Animal health expenditure covers mineral supplementation, (done via in line dispenser or dusting), vaccinations for salmonella and leptospirosis, calcium boluses for cows over 4 years old, testing for BVD and Johnes disease for the herd, plus drenches, vaccinations, Cu boluses and minerals for young stock.
  Mastitis management includes dry cow therapy for the herd and teat sealing all cows and first calvers. The SCC for 2023-24 was 105,000, which was higher than usual in part due to the wet spring. Lameness has been a problem in 2023-24 due to the wet weather.
• Young stock policy
  The replacement rate is about 22-24%.  Heifer calves are reared on colostrum and whole milk plus pasture and meal. All colostrum milk is tested and the best quality is frozen so that it can be used to ensure every calf gets fed "gold" colostrum with in 12 hours of birth. This provides better lifetime immunity for each calf and results in healthier cows long term. Meal is fed until February, (up to 2 kg meal/calf/day). Meal is bought in bulk and a hopper is used for feeding out.  This has resulted in a 30% saving in meal price compared with bagged product.
  At 6 months old the calves go to external grazing. They are consistently well above industry recommended live weights.  They return home, 15 months later, as in calf heifers in early June.
  One of the most important relationships a farm can have is with their young stock grazier, so a good relationship with a high level of trust is crucial. The farm has a very good grazier who delivers excellent results. The young stock are always above target weights.

• The farm is currently staffed with a contract milker and 0.1 FTE of unpaid owner input.
• A lot of time in the past has been invested in growing a farming business that operates to a high standard and is well regarded by the community, and peers.  This "brand" is very important and time is taken to ensure that any employees understand the ethos of the business so that they can continue the legacy.
• The farm is compliant for all health and safety requirements.

Overview: August 15th, 2023

Being prepared means we have been better able to deal with the recent declining milk prices. The original budget for the 23-24 season was based on a $9.00/ kg MS pay out, (below the original Tatua forecast), and at 8% interest rate. The current Tatua forecast is now at $9.00/kg MS so a budget revision is not needed just yet. Other factors which have contributed to being in this position are:

Current debt servicing is locked in till March next year, at significantly lower than the 8% we have used in our original budget
At this stage it looks like there might only be one more hike in the OCR so the farms interest costs should come in under budget for this financial year
All major capital expenditure has been done over the last couple of years so there shouldn’t be any big expense surprises
This year some of the farm costs seem to be coming down, (although slowly). PKE for the season is locked in at an average of $300 delivered which is about $100/t cheaper than the year before, (and about 10% lower than budgeted).

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

Talk with your bank, accountant, suppliers and with your farm owner. There are a lot of people in the same situation.

Look at expenses that are not necessary or where you can make efficiency gains. For example, use the effluent pond more effectively and don’t put urea on those paddocks.

Know your soil fertility on farm and know where you can make cuts in phosphate or lime, for example. An $80 soil test is cheaper than a $500/tonne product.

Cull cows early, like empties/low producers, especially if we are in for a dry summer.

Have a plan about upcoming issues. Try to deal with them early, not the day of or day before, as you will just be setting yourself up for stress.

If you have a question and don’t know where to start, ask someone, as it is likely they have been through a similar situation so you can learn from them.

Your local DairyNZ extension partner is always up for a yarn if you don’t know where to start.

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

This is short term and it is not new. Every decade we have a period of unease and stress. The word volatility has been around in the dairy industry since 2007.

Go to discussion group and listen. Most people will be thinking what you’re thinking and a problem shared is a problem halved. Talk with neighbours, partners and industry people. Many of them will have experience of lower payouts and could have valuable advice.

Spend time with your family and friends when you can and do simple things. Go for a walk in your local region, off farm. Pack a picnic and find a path/playground/beach you have never been to. Laugh and have fun on that day. The farm will be there tomorrow but you will have a new memory that didn’t cost a thing.

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

If you can, talk to suppliers, and ask them to spread payments for items, so you don’t go into overdraft. Spreading payments over 3-4 months lightens those big bills.

Talk with employees and ensure you are doing what you can to minimise the stress of this time of year.

Our first year with a contract milker is going well. Having good communication from both sides and knowing where we both stand has been key. Giving them the day off by getting back into the shed for the day also helps with easing the stress of calving and wet weather.

October 24th, 2023

How has the season been so far?

• The season has been challenging with a wet start to the early calving. Trying to manage the small areas while following the spring rotation planner was difficult while trying to avoid damaging soil and pastures. But we came up with a strategy and stuck to it. 
  Through that time, communication with everyone was important as it was stressful. Sharing the work load was the best way to ensure there was no burnout.
• Rainfall naturally has been higher than average and water tables are high.
• Production for the season is 8.5% down on last season and for the month of October it is 1.9% behind. On a daily basis we are currently 9% down, but that is in part weather related.
• Due to the wet weather we have fed out more balege and maize early in the season, but we had more on hand at the start of the season so current feed reserves are still good. PKE usage for the season to date is similar to last year, (so on budget).
• We still have a good amount of maize on hand and our PKE order was done at the field days at an average of $300/t delivered. We contracted 200 tonne over the year which is about what we use over previous dry periods.
• Making silage has been delayed compared with normal. We have made a small amount compared to normal but still have reserves from previous year so supplements on hand are the same as usual going in to the summer. We are looking to make one more cut before Mid-November. If we get another after that it will depend on rainfall.
• Nitrogen application was later than normal due to access to paddocks, but we managed to get a round on in mid-September and our annual spring fertiliser including N was applied in October.
• Pasture covers have been on a roller coaster as well with the variability in weather and temperature. They have never gone too low as we have managed to fill any deficit in feed demand with supplements on hand.
• We are still feeding maize and will look stop that for the Months of November/December once AB finishes. We can then start again around Christmas once the summer dry kicks in. 
• With the damage to paddocks limited to a few paddocks due to strategic management over that time it has given us more options to crop. We will do an extra 2ha maize, (usually 8ha but now 10 ha). This should provide more supplement if the summer is dry.

What are cash flow forecasts looking like? How will a drought impact this?

• Cash flow is still good, due to the deferred payments from last season and a good end of season dairy company result. The past few years have seen a lot of work done on ensuring infrastructure is in a very good state. There are no more large R and M costs in the budget this year, and we have in the past focused on debt repayment so the farm financial position is strong.
• Our biggest worry is that our interest rates are coming off fixed terms in March 2024. These will then be double what they have been, at the very least, which will add stress to the cash flow. In previous years we have use this margin to cover R and M costs and repaying debt so there is cash already in the budget earmarked to cover this increase in interest costs. 
• We do have off farm income as well so if there is really severe financial pressure, (big drop in milk income along with increases in feed and grazing costs etc), we can cut our cloth to suit our income and reduce the demand on the farm for funds for drawings.
• We remain hopeful that we also might see the OCR drops mid-late next year and so will only need to cover higher interest rate for a relatively short period.
• Having been through a few droughts now we have a very good idea of how the season could unfold and have strategies to deal with that. We have already contracted our PKE at a fair price and grow our own maize at a low cost, so feed costs relative to pay out are favourable.
• If there is a severe drought our income will be down and farm costs will be up. Our overall financial position is strong though due to a history of debt repayment so we will be able to cover short term cash deficits. For instance, there is still the the option of going to interest only for the farm debt servicing. 

Has the NIWA El Nino forecast changed how you are approaching this summer?

• The NIWA forecasts haven’t changed anything very much for us as some summer dry has already been factored in to our budgets.
• We have booked in that extra PKE early, (when the price was really favourable), and we are growing 2ha more maize.
• We will use N to build some cover to try one more cut of silage to have on hand through a dry period.
• We are already thinking about animal welfare and have a plan to ensure their well being is looked after.  It is not just about having enough feed, it is also about adequate water, timing of milking’s to avoid the heat, and having access to adequate shade in the middle of the day.

What strategies do you have this season for when a drought comes early, late, or is prolonged?

Comes early

• Don’t panic.
• Herd test and cull early, (low producers and empties), after a scan.
• Use OAD as a strategy. 
• For mental health reasons make sure that we and our staff can get away and enjoy the sunshine for a small part of the day with friends and family.

Comes late

• If it is extremely dry later in the season then we will get the under sower ready so if pastures open up we can carry out pasture repairs as soon as the soil moisture is at a good level again.
• We will not compromise the next seasons targets of having cows at CS 5 for calving and pasture cover 2300-2400 by first June, (if rain allows). So will make drying off decisions accordingly.
• Discussions could be had with our grazier to maybe hold the weaner calves on farm for longer. They usually go to the grazier in Jan/Feb so we could keep them on farm and use supplement for them. It will put less pressure on feed at the graziers if we hold them on farm till May and swap with incoming in calf heifers.
• Talk with your graziers, as remember, a drought will most likley be affecting them too and you don’t want to compromise your in-calf heifers.

Is prolonged

• We would do nothing different from above. Just have that plan in place and reassess it often.
• Keep communicating with lenders and suppliers so any financial issues can be dealt with early.
• Use the dry to get off farm to clear your head. 
• Talk with friends and neighbours and DairyNZ extension partners just to confirm your plan. You might get that bit of knowledge that you could apply to make life easier. Talk the stress out with anyone and have a plan to discuss.

•    A wet winter and spring and a slow calving pattern has resulted in milk production for the season being revised down by 8%.  
•    Total farm working expenses are likely to be similar to budget, but on lower milk solids produced could finish about $0.50/kgMS higher than budgeted, ($5.82/kgMS compared with $5.36).
•    Savings from purchasing PKE and calf meal at significantly lower prices than budgeted have helped to offset increases in animal health costs, fertiliser and extra cropping/pasture renovation costs.

Comments

The area experienced a particularly wet winter and spring this season. It was very difficult to follow the spring rotation planner and avoid pasture damage. Despite frequent standing off there is still pugging evidence in some pastures even now.
Milksolids to date is 7.7%, (5,500), behind last season, from 212 peak cows milked. The majority of this loss is due to the wet weather and lower pasture growth and utilisation. The herd was also impacted by lower conceptions rates the previous spring for cows mated to sexed semen. This affected 22 cows, (20% of the herd) that ended up calving 3 weeks later. The lost days in milk equates to about 1,000 kgMS.
The herd peaked late September at 2.18-2.20 kgMS per cow/day. This is lower than previous years but not surprising given the wet spring and slower calving pattern.
PKE for the season was contracted for $300/t landed, (a good deal at the field days), which is $30/t below budget which has saved $6,600.
This spring the herd was fed grass silage, maize silage and PKE, whereas previous years it has just been PKE. Maize silage was fed until the end of October to ensure cows were well fed and pasture cover was maintained.
Despite the variable spring growth rates small surpluses did occur and 220 bales of baleage have been made, up slightly on the 200 budgeted.
There is now 10 ha of maize growing, with an extra 2 ha of maize was planted, compared with budget. It was planted in mid-November, 2 weeks later than planned.  It is growing well now with recent moisture and sunny hot days, and is on target for harvest in mid–March, again 2 weeks later than planned. Vigilance will be needed to ensure weeds and pests are not an issue from now on, so that the crop yield is not impacted.  At this stage yields are still expected to be in the range of 20-22 t DM/ha.
The decision to plant extra was partly made for drought mitigation, but also there was more area needing repair after damage from the wet spring.

Current situation

There are currently 209 cows in milk, producing 1.3 kgMS/cow/day average for last 10 Days. This is 8 % down on the same time last season.  
The herd is currently being milked twice a day but will be going to once a day milking January 21st. This is partly due to the heat but also for logistical reasons as the contract milker will be on leave and the owners are milking, (as well as working off farm). This is about 2 weeks earlier than usual.
Recent rainfall has been welcome and pastures are still looking green which is always good at this time of year.
It appears that the heat is starting to have an impact on the cows as they are eating less during the day and leaving higher residuals. To help reduce this stress the cows come onto the feed pad in the middle of the day and move back out on to pasture in the afternoon.  
The herd is currently being fed 17 kgDM/cow/day, made up of 3-3.5 kgDM maize silage, 2.5-3.0 kgDM PKE and 10-12 kgDM of pasture. Body condition score is about 4.0 which is average for this time of year.
Pasture cover is 2,150 kgDM/ha which is on target. Pasture growth rates are 45-50 kgDM/ha/day so with 52 replacement calves also on farm, and 10 ha out for maize, cover is just holding.
Low levels of zinc supplementation have been started through the water supply and levels will be increased gradually.  Spore counts are taken on farm and are just starting to rise this week, (they are at about 10,000).
The rising 2 year old heifers at grazing have just been given their first zinc boluses, the next will be in 6 weeks’ time.

Looking forward

The budget has been revised and is now based on 92,000 kg MS, an 8% reduction in forecast milk production.
The final pregnancy scan for the herd will be done in early February to establish the actual empty rate. Once these are known feed budgets and stocking rates will be revised.
After keeping aside 151.6 tDM to carry through till next season there is sufficient supplements available to allow for up to 7-8 kgDM/cow/day till the end of the season. That is made up of 22 t Maize on hand from last season about 70 tDM maize from this year’s harvest, 18 tDM of baleage and about 69 tDM PKE still to use).
The yearlings are due to go to grazing shortly, however there is flexibility with this and if pasture growth continues to be above demand they can remain on the milking area.
All decisions from now on a made to ensure that cow condition, pasture cover and supplements on hand at the end of the season are on target so that next seasons performance is not compromised.

Calving and reproduction

For the 2023 spring cows calved after 3 weeks was 54%, after 6 weeks, 81% and after 9 weeks, 98%. This is significantly behind previous years which have been more in line with the industry targets of 67%, 88% and 98%.
The submission rate after 3 weeks of 82% is below target but reasonably good considering the slower calving rate.  However the conception rate is again below average with further semen quality issues occurring this mating, so the estimated in-calf rate is only 59%.
Planning is under way to identify courses of action to take to improve the calving pattern for next spring and minimise the effect on next spring’s mating.  This includes; 
•    Pregnancy testing in calf heifers to get accurate calving dates so a more accurate calving pattern is available.  
•    Selling later calving cows and buying in cows that will calve in the first 3 weeks
•    Use pre-mating heat information in the spring to identify cows for hormone treatment to bring some of the later calving cows into oestrous sooner.
•    Use nominated frozen semen which will give more certainty around semen quality.
Replacement calves reared is 52, one more than budget. The cost of meal this year is down on budget as early in the season the switch was made from buying bagged meal to buying it in bulk. This did necessitate the purchase of a hopper to handle the bulk meal, but this cost was recouped from savings after 7 loads of meal. Bulk calf meal is about $400/t cheaper than bagged, and with 15t meal fed to calves until February the total savings is about $6,000.

Other points of interest

•    There have been a few electrical issues following variable power supply, (possibly weather related but not proven), which has added cost. In particular the protrack computer has needed repairs.
•    Animal health costs are up as a result of the wet and muddy spring.  The incidences of Environmental mastitis were higher so more treatments for mastitis were needed.  The cost of mastitis remedies has also risen.
•    Somatic cell counts have been higher this year, tracking 50% above than last season.  This is partly due to the wet spring, (and increased environmental mastitis), but also possibly related to having a focus of reducing the use of dry cow therapy at drying off. The average season to date is currently 99,365, compared with 64,224 last season to the same date.
•    Fertiliser costs will likely be up as recent fertiliser tests indicated lime was needed. Half the farm got an application of 2.5 t lime/ha and the other half got 1 t/ha.
•    With more maize planted, cropping costs are up, but PKE costs are down so the net feed costs should be similar to budget.
•    Nitrogen applied is still on target of about 160 kgN/ha with a further 1-2 applications still planned. Sulphur will be applied with the autumn nitrogen applications.
•    The business has still generated enough cash surplus for continued debt reduction albeit at lower levels than some previous years.
•    Conversations will continue with banks to ensure that good financial management, debt repayment and strong environmental achievements are recognised when interest rates need to be refixed in the autumn.