DairyNZ took a closer look at farms in Waikato on DairyBase and specifically targeted the top 10% of owner-operators in terms of operating profit/ha.
DairyNZ economist Angie Fisher said the top 10% group they identified in one season stayed in the top 10% across five seasons despite drought and milk price changes.
Per ha and per cow production weren’t necessarily the highest, and some were even below the average benchmark for production.
But they did consistently have lower overall operating costs than the average.
Fisher said that as input prices rose, particularly during the 2007-08 season when onfarm inflation was 10%, the top performers also increased their costs. However, on a percentage basis that increase was less than other operators.
In the group they studied, specific costs varied in relation to the average.
For instance, some had animal health costs that were above average and others well below, while some had breeding or feed costs that were high and for some those cost items were low.
“There was no one factor in terms of a cost area in the budget where we could say that’s how these high performers achieve that level of profit,” she said.
Essentially they all had their own recipe, farm system differences and opportunities based on their situation where they could make gains.
DairyNZ economist Angie Fisher – top performers consistently have lower costs.
Another study run by DairyNZ and Lincoln University’s Agribusiness Economics Research Unit looked at a group of 150 farms – 75 from Waikato and 75 from Canterbury – and focused specifically on the top 25% of those farms on an operating profit/ha basis for the 2010-11 season.
Fisher said that while it was again difficult to isolate specific trends in budget spending, there were seven common characteristics in terms of actions and behaviours.
The strongest difference between the top quartile farms and the low and middle group was the use of benchmarking.
Knowing where they were in the field in terms of operating profit, operating costs and farm working expenses gave farmers an indication of where they could focus their attention.
In the survey group 85% of the top quartile farms had budgets and were more likely to check actual spending against budgeted costs.
They were more likely to network with other farmers to swap ideas, help others and be a source of advice to others. Most of them also went along to DairyNZ discussion groups.
They were more likely to run the farm the way they wanted to regardless of what others said, and were confident decision makers.
The top performers were likely to have come from a farming background and have more than five years’ experience working on dairy farms.
They described their farm dairy as more up-to-date and reliable than the average in their district and a greater proportion of the top quartile farms were managed by couples.
Southland dairy consultant Ivan Lines said consistently high performing farms in terms of profit were always good pasture managers.
Their ability to get higher than average pasture utilisation was the number one factor when it came to high profit farms.
Production was typically above average but more importantly they critically analysed all their costs associated with that production so that it was profitable production which was key.
“They’re always asking the question ‘is this the right economic decision?’,” he said
They were often confident and quite single-minded when it came to questioning any suggested additional spending and weren’t likely to listen to sales patter.
“They’d rather make their decisions based on their own research and what they find by digging into a product or topic than listen to what sales people tell them.”
Top performers using imported supplements were more likely to use feeds at the cheaper end of the scale, even those who were using higher levels of imported feed.
“They’re not likely to be buying in expensive mixes. It’s more likely to be the cheapest feed, palm kernel for instance, but they do their homework and buy well,” Lines said.
They typically took a no-frills approach to inputs and gear.
They would use basic minerals rather than expensive mixes for cows and stick to tried and tested, science-based inputs.
Lines said they would base input levels on fact, so they carried out soil testing to ensure they were putting the right amount of fertiliser on in the right places.
“It really is about doing that critical analysis so they’re using just what they need and what they know they’ll get a response to whether that’s fertiliser or any input.”
They also had good relationships with their rural professionals and used them more to analyse options and their overall business performance.
Because they were talking to their accountants, bankers and consultants more they were more likely to be quick to identify opportunities where they could save money, he said.
“They’ll be the first to redo the budget when the payout changes and send that information through to their bankers and accountants. It means those advisors can identify implications for tax, for example, and being quick to move then with what you’re doing onfarm or with your finances can mean significant savings.”
