Budgeting, Andrew and Vicky Booth (Northland)

2023-24 mid-season update as of 31 October 2023.

View/download PDF of updated budget

The season has been significantly influenced by the wet autumn and winter and flooding events in May. Floods and wet weather hampering regrassing of crop areas so the first half of the season has been without 30 ha of milking area.

Milk production is likely to be about 156,000 kg MS, which is 2.5% down on budget. As an all Autumn calving herd and having a budget from April 1 to March 31, the drop in milk price has not impacted the milk revenue too much. The updated budgeted milk price is $4.33/kg MS which is only about $0.05/kg MS different from the original budget.

Stock income has been revised downwards by about 35%. An additional 8 bulls were purchased and stock prices have weakened compared with budget.

Total dairy operating costs are up 7.5% on the original budget, with the updated forecast at the end of October coming in about $46,000 more than planned. With lower total milksolids expected for the season and higher costs, the operating expenses per kg MS is forecast to be up $0.39/kgMS to $4.13, which is a 10% increase.

Less has been spent on fertiliser as the wet weather over the autumn and winter has impacted the application of nitrogen, plus there has been 30 ha which have been out of pasture which have not had any fertiliser applications to date.

Regrassing and cropping costs were down on budget as more work has been done in house, this is offset by higher vehicle and fuel costs so the combined total will be similar to the original budget.

Purchased feed costs are up about 12.5% as more supplements was purchased through the winter to make up for the loss of milking area. Costs for supplements made are down as there has been no supplement made on the milking platform, (70 t DM silage was in the original budget).

Many other costs are up slightly on budget due to cost increases. See the PDF file with the full budget updates and comparisons, and their case study profile "Strategies for managing a dry summer" for more season update commentary.

• Vision
  Have a farm that is both environmentally and economically sustainable long term. Work life balance and community involvement are important, and a real strength of the business, facilitated by open communication with staff, and embracing staff flexibility to secure time off farm for the family.
  
  
• Values
  Be leaders in the dairy industry as DairyNZ ambassadors, and through involvement with the Dairy Environmental leaders group and Northland development trust.
  
  
• Budgeting
  Prepare budgets for the season and frequently monitor and update them so the current farm cashflow position is always known.
  
  
• Environment 
  Taking care of the environment is a priority on the farm, an approach that is leading to better production outcomes as well as wins for freshwater, biodiversity and the climate.
  Recognise that the Mangakahia River is an important ecosystem for the farm and the surrounding valley, and take actions on farm that will protect this important resource.
  Aim to farm fewer but more efficient cows through breeding higher genetic merit animals.

• The dairy platform is managed as a System 3 for inputs, with palm kernel and DDG bought in along with maize grown at the support blocks. Additional maize is grown on the milking area.
• Pasture and crop eaten is about 9.5-10.5 t DM/ha for the last 4 years.
• The farm has an effective area of 174 hectares, with the balance made up of pockets of native bush, wetlands and swamp, retired areas for native planting and a small block of plantation forestry as well as the farm facilities such as sheds and buildings, yards and races.
• The topography of the farm is mixed. Sixty percent of the farm is on the top flat plateau with predominantly volcanic and peaty soils. The remainder is hills going down to the lower river flats where there is a mix of silty loam and clay soils.
• The river flats are prone to flooding 1-2 times are year. 2022-23 season it was 16 times. May 2023 some areas were under flood three times in 10 days.
• The farm receives around 1,400mm rainfall on average each year and is not irrigated other than with stored effluent.
• The farm has a feed pad that can take up to 300 cows. It is connected to the effluent system but is uncovered. PKE and Maize are fed on the pad. Silage and hay are fed in paddock.
• 398 autumn calving cows, run in two herds, are milked through a 36 aside herringbone shed. One herd is milked once a day. Milking takes two people about 2 hours for 2 herds.
• The farm topography and location of the farm dairy means there is a 1.8 km walk to the most distant paddock which includes a hill. The once a day herd gets the longest walk.
• All cows and in-calf heifers are on the milking area during the dry period.
• Young stock are grazed off the milking area from weaning.
• Farm infrastructure, number and size of paddocks, races, water supply and buildings are in excellent condition.
• The whole herd may sometimes be milked once a day for 8 weeks, from 2 weeks prior to mating, to limit the incidence of lameness and the impact that may have on reproductive performance.

Pasture
Pasture cover over the whole farm is measured fortnightly with a plate metre, with additional monitoring done on the few highest cover and lowest cover paddocks in between whole farm walks, particularly at times of very high or very low growth.
The information is used in feed budgets to determine grazing rotation and levels of supplementation.
Pasture on farm is predominantly ryegrass and clover, Kikuyu is not a problem.
More recently regrassed areas are being sown with ryegrass, white clover 1% chicory and 2 % cocksfoot mix on the wetter soils and chicory, ryegrass clover, cocksfoot, fescue and Lucerne on the drier soil types.
Grazing rotation length over the dry period, (March) is 90 days, moving to 40-45 days through the winter. Allocation of feed to milkers is based on residuals, (and soil conditions).
The spring rotation length is based on pasture cover and growth rates, but will get down to 21-22 days at the peak of spring growth rates.
The aim is to move to a 30 day round for summer, usually by Christmas, but again is dependent on growth rates and pasture cover.
By late January, as growth rates slow the grazing rotation is moved out to 40 days with the addition of supplements and drying off of some cows.
The last of the herd will be dried of in late February, and will be on a 90 day round with supplements.

Feed policy
In addition to pasture, the springers are fed hay in paddock, while dry cows are fed maize silage on the feed pad.
Through calving and winter the herd is fed maize silage and PKE/DDG on the feed pad with grass silage fed in the paddock.
Late spring and early summer the herd is largely fed pasture only.
Silage will be fed again in summer.

Cropping
Chicory is often used as part of the pasture restoration programme and crops and grass seed are direct drilled to protect soil integrity.
The plan for 2023-24 is to grow 10 ha Maize the milking area and 5 ha on the support block.
Much of the area regrassed autumn 2023 has been affected by subsequent floods and will be under sown in the spring when soil conditions dry out.

Supplements made
About 70 t DM of grass silage is usually made on the milking area and about 140 t DM of baleage and hay is made on the support block with about half of that coming back to the milking area.
Pay all costs for supplement made on milking area and half for what is made on support block

Supplements imported
About 270 t DM of PKE/DDG are usually imported along with 70 t DM maize from the support block, 50 t DM baleage and 12 t Hay.
Feed contracted for the 2023-24 season is 270 t PKE and 77 t DDG. This is nearly 25% more than last season. Stock grazing pressure is temporarily higher with over 50 ha of pasture currently ungrazeable due to the impacts from the 3 floods in 10 days that affected the farm in May, so the extra feed is needed to ensure pasture cover is maintained.

• Lower quality animals are culled earlier in the season if they’re not performing
• Focus is on transitioning the herd to being highly efficient with the aim towards milking fewer cows and put less feed into maintenance, but produce similar amounts of milk. The current BW is 167 and PW is 204
• Herd testing is carried out 4 times a year with one milking per test. This information is used to assist mating and culling decisions.
• Mating is 10 weeks, 5 1/2 weeks of AB and 4 ½ weeks with bulls. Bulls are returned to the herd again in October to give any empty cows another chance to get in calf. These will be sold as spring calving cows at the end of the season.
  The policy is to use half Friesian semen and half crossbreed semen, with the aim of achieving an F12 herd. Jersey looking cows are mated to Friesians and Friesian looking cows are mated to crossbred. The bulls used over the herd for the tail end of mating are Hereford.
• The empty rate for the 2022-23 season is 9%. This is 36 cows. An additional 10-12 will be sold as in calf spring calvers, which gives a total of empty or spring calving cows of 12%.
• Heifers are mated to low birthweight Angus bulls.
• All calves not kept for replacements or dairy beef are sold as feeder calves at the sale yards. There is always strong demand for autumn born calves.
• The replacement rate is 22%.
• The animal health focus is on good observation, prevention and early treatment if required.
• All minerals and zinc are delivered to the animals on the feed.

• Currently 1 full time permanent staff member is employed, 1 milking assistant and 1 part time employee, (about 30 hours per week). This is likely to increase later in the season and the owners will have less hands on input on this farm as they have just purchased a new spring calving farm and will be more involved in setting that up.
• Having one part time employee allows for flexible work rosters, but rosters are usually based on a 2 week rotation with 3 days off every 2 weeks and 6 early starts per week.
• Unpaid shareholder input is currently 1.1 FTE, but could drop to 0.6 FTE later in the season if additional staff are employed.

Soils and testing
pH range is 5.7-6.2
Olsen P range is 12-19

Nitrogen
Nitrogen is applied through the winter at rates of 18-30 kg N/ha. 100 kg N/ha have been used in the previous two seasons.
Product used is Ammo36 (for 1 ½ rounds in the winter) and urea or SustaiN for the balance of the spring and early summer if needed.

Riparian planting
The family has been planting and restoring land for years, with upstream and downstream neighbours now joining the community effort. Generous riparian zones have been set aside on the farm and planted to prevent erosion, protect waterways, and increase biodiversity and habitat.
More than 5 ha of riverbank have been fenced off between the dairy platform and the support block, which is just up the river. All bush pockets are fully fenced, and plans are in place now for fencing off a0 lot of the critical source areas around the farm, as well as small drains. Around 25,000 native plants have been planted over the last five years.

Effluent
90 days storage, irrigated onto 44 ha.

Environmental KPI’s
Purchased N surplus for 2022-23 was about 97 kgN/ha/year.
Methane emissions 7.14 t CO2 equiv/ha/year for the milking area.

October 24th ,2023

How has the season been so far?

• The wet autumn and three flooding events in 10 days in May have had big impact on the season. Effective pasture area was down 18% with 20 ha of flood damaged river flats and 10 ha of maize area that was too wet to regrass. More was spent on supplements through the winter to compensate for the lower grazing area and more cows were culled earlier so cow numbers in milk now are down on budget. 
• Production, season to date, is 2.1% up on last season but down on budget. The budget has now been revised down to 156,000 kg MS (similar to last season but 4,000 kg MS down on budget).
• All supplement carried through from last season has been fed out.
• Supplementation with PKE was stopped 5 weeks ago and the herd went to an all pasture diet. This is a month earlier than last year.
  This year the whole herd went to OAD for mating, (compared with only half the herd last year), plus more cows have stayed on OAD, (140 cows this year compared with 100 last season).
• Month to date production is down 11% on last season and daily production is behind the same time last year, due to the lower number of in milk cows now, (376 compared with 391 last season), more cows on once a day and no supplement in the diet.
• With the season being quite wet from calving until September the incidence of mastitis is up and SCC is currently above 200,000 which is higher than usual. Repeat cases of mastitis are also higher than usual. This has impacted costs and production.
• 6 ha of maize was planted on the support block in mid-October, with a medium range maturing variety.
• 10 ha on the milking area is currently being prepared for planting with maize and that should be in the ground by 3rd November.
  Maize cultivation costs should be a bit lower as contractors were used less for cultivation as the owner has new ripper and more work could be done in house.
• Over the last month the 20 ha of river flats have gradually been cross-drilled with 5 kg/ha of chicory and 15 kg/ha of ryegrass and white clover. The earliest sown areas have established well and are up and growing. First grazing’s should be due late November. All this was done with our own gear so it was easy to work around the fickle weather and get it planted when the conditions were more suitable.
• Pasture cover is holding. There are 5ha out of the rotation that will be used for deferred grazing.
• 13.4 t DM of baleage has been made at the support block that could potentially be used on the milking platform.
• There is still 40 t PKE contracted to be used by the end of December.
• A summer crop of mixed multi species pasture has been planted at the support block for use by the calves. In the past, during droughts, PKE has been used for the calves. Hopefully the crop and baleage will be enough. PKE can also be added if need be.
• One herd test for the year has been dropped and one herd test moved so that the samples could also be used for pregnancy testing. This will reduce costs slightly.
• Early results indicate 21 cows (5%) not in calf and a further 16 (4%) will need retesting. Bulls are currently with the herd so that any empty cows can potentially get in calf and be sent to the new farm (spring calving). Given the wet autumn and winter these early results are encouraging.
• N use on pasture for the season is now all done – soil moisture and rainfall from now on is usually not sufficient to justify N applications.
  N use for the season so far is 14 t Urea, 13.8 t Phased N quick start and 7 t SustainAmmo 36. Crop fertiliser is on top of this. This has been applied to 142 ha. There is still N to be applied to maize crops and to the chicory area.
• With taking on the new farm in June there has been a reshuffle of staff. There are now two new staff members on this farm, as the more experienced staff members have moved to the new farm.
• As they are less experienced the wages cash expenses are lower than budgeted. However the unpaid shareholder input is up from the estimated 0.6 to 0.9-1.0 to support the new employees so the overall total labour costs for the farm will likely be similar.
• The races have held up reasonably well considering how wet the year has been but they will need some work done, now that it is dry enough. It has been too wet all year to do any effective repairs.

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

• Despite the slight lift in the forecast milk price, the cash flow still looking ugly as at this stage as the SM job is covering a lot of the debt servicing on the new farm. Early and clear communication with the bank is helping with managing this.
• That said, Farm cash surplus before debt servicing, capital investment, tax and drawings has not changed too much.
  If there is an extended dry period the final MS for the season could be revised down further – it just depends how early the dry comes.
• A severe drought through January could mean more PKE/DDG for use in February and March may be need to be purchased to ensure we can get set up for the 24-25 season. This will of course impact farm working expenses.
• Tax obligations have been revised downwards and these will be reviewed again early in the New Year – particularly if the pay-out is revised upwards again.
• Capital spend is up as a very old tractor needed replacing. This was funded through borrowing using John Deere financing which was cheaper than the bank.

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

• NIWAs forecasts have been a bit concerning although with all the rain over the past 12 months is has always been likely that a drought is due and that has been factored into the budget and earlier management decisions.
• The calving date for 2024-25 season is April 6th which is a little later than many Northland Autumn calving farms. We have settled for this date as the farm can get very dry over the summer so a later calving date takes the pressure off in the early part of the new season if there is a drought.
• With this later calving date we can still have a 100 day rotation in March and build some rough cover. By late March all the maize will be harvested so this should provide sufficient feed for the start of calving.

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

We already have a lower stocking rate than usual with having 18% of the milking area out of rotation through the winter. Twenty hectares of that should be back in rotation by the end of November and with only 5 ha of deferred grazing, the available area for grazing relative to the current stock numbers is better than is better than for previous summers.

If it gets dry, the options are:

• Reduce feed demand by change milking frequency, reducing stocking rate by culling any cows not needed for the herd next season and selectively drying off cows based on body condition score and calving date.
• Feed the remaining contracted PKE.
• Try to get to a longer round a bit earlier.
• Buy more feed to set up next season.

If it is really dry in March/April then OAD from calving is always an option.

^{*These KPI's are based on cashbook actuals to 31 March 2023 and estimated non-cash adjustments. The final financial performance based on financial statements may differ.}

View PDF of 2022-2023 actuals

Comments

• The 2022-23 season has seen multiple weather events. While flooding of the Magakahia River is not uncommon and usually recedes quickly, this season has seen many more flooding events which impacted some of the pasture and cropping areas on the adjacent river flats.
• The river has flooded 16 times this season. Coming out of the winter 2022, 23 ha’s of chicory were planted twice to try and boost the feed supply for summer in that area, but it was relatively unsuccessful due to repeated flooding.
• After the late January and early February storms, all the river flats in the area were regrassed again. Most of the area had its first grazing just before everything went underwater again, (3 times in ten days).
• The last rain events have also impacted the new grass in the 10 ha maize paddock so the farm is heading into the winter without the use of about 50 ha.
  The very wet summer and autumn on the other hand has meant that very little pasture silage was used over the summer and a bit less PKE was needed, so more silage has been carried forward.
• The total amount of maize harvested was down this season even though the areas planted were similar to last year. Of the 17 ha planted, 10 ha were harvested with yields of 20t DM/ha. Of the remaining 7 ha, about 3.5 ha grew 18T DM/ha but this was eventually sold to another family farm as at that stage their feed situation was more dire due to a large maize failure. The balance of the 7 ha’s was not worth harvesting.
• Feed on hand to take into the next season is 282 t DM which is very close to what was budgeted, but the balance between silage and maize is different. This is a problem as the silage is fed on the paddocks and the ground is currently too wet for feeding out.
• While the cash surplus for the 2022-23 season was about 9% up on the previous year the operating profit was down 45% due to the value of non-cash movements. These relate to a decrease in MA cow numbers by 42, (a function of not being able to unload culls at the end of last season), and having 30 t DM less feed on hand at the end of the season compared with last season.
• Farm working expenses of $3.35/kgMS are 8% higher than the 2021-22 season. Total farm operating expenses, (cash and non-cash), have increased 34% since 2020-21.

Other points of interest

• Production for the financial year, (April to March), of 155,675 kg MS, was similar to the previous year, (155,697 kg MS).
• Peak number of cows milked, (June), was 396 which is similar to the previous two seasons.
• Total feed eaten was similar to the previous season at about 13.5 t DM/ha.
• The six-week in-calf rate from the winter 2022 mating was 69%, slightly down on the previous season, (72%).
• The not in-calf rate was 5%, which compares very well with the previous season of 11%. This good outcome is in part due to the success of running the bulls with the herd again in October so that any empty cows from 101/2 week winter mating have another chance at getting in-calf. This means they can then be sold as in-calf spring-calving cows rather than empties.
• Nitrogen applied for the season was 100 kg N/ha.