With feed one of the big three when it comes to farm expenses, James and Ceri Bourke have a not-so-subtle way of making sure supplement use is restricted to only when it really is absolutely necessary.
Their tractor isn’t fitted with a cab so there’s no cosy heater or stereo sounds to listen to – feeding out has the operator at the mercy of the elements.
“It’s probably the least comfortable job on the farm,” James says.
The Culverden couple are low-cost and profit-focused with an eye to making rapid equity gains.
For them that means keeping feed inputs down and concentrating on getting pasture management spot on.
There’s no room for loose decision making when it comes to feeding levels.
There’s no in-dairy feeding, no switch to hit or dial to ramp up the inputs if the weather turns a bit colder and they’re certainly not going to use feed in the name of cow flow.
Instead supplement is used purely as a way to manage pasture covers, not cows.
‘There’s probably savings too by not having bulls on the place with the amount of physical damage they can do.’
Production, while it’s important to ensure the revenue line is healthy, isn’t the main driver.
James and Ceri 50:50 sharemilk 800 cows and contract milk another 800 cows on the same North Canterbury farm through two farm dairies.
It’s their third season working with farm owners Peter and Ruth Mossman but the first with the second farm dairy in operation.
They’re yet to get their DairyBase figures back for last season but in the previous season, their first with the Mossmans, farm working expenses (FWE) were $1.21/kg milksolids (MS) for their 50:50 sharemilking business.
Their operating profit, at $2176/ha for their sharemilking operation, puts them well within the top 10% when benchmarked against other 50:50 sharemilkers on operating profit per ha.
The top 10% in that year earned $2029/ha.
They don’t share in Fonterra’s dividend payment, and receive 95c/kg MS as payment for the contract milking side of their business.
The healthy cash return they generate is ploughed back into the business, increasing their equity and stock asset base.
As their equity mounts the annual equity growth they see in percentage terms is dropping from the heady early days of more than 1000%, but it was still at 46% in 2012-13 and their total return on equity is an impressive 59%.
Return on assets for the top 10% benchmark group was 21.3% while theirs was 44.3%.
Their attention to maximising pasture utilisation means that every week the farm unit managers take their platemeter for a walk around the farm. It’s a job that used to be done with a C-Dax tow-behind but this year, with the two farm dairies operating and first-time unit managers, Damien Anderson and Roger Paragas in charge, James says it’s important for them to get a firm grounding in the mechanics of pasture monitoring and allocation.
Every paddock is plated as cows go into it to double-check the allocation is right.
If cows don’t clean up the paddock and get down to an even residual of 1500kg DM/ha they go back into it although that might be the next morning rather than that night, so no one has to go out in the evening and move them.
Unit manager Roger Paragas – staff milk one herd each, keeping them fresh and efficient and helping keep farm dairy costs down.
They DNA test as part of the sire proving scheme so that acts as a back up for the later SGL Jersey calves.
They have a laminated sheet with cow numbers and matings listed on it in with the calving gear they keep in the calving paddock. The staff refer to that if there’s any doubt at all.
As an incentive to keep everyone on their toes though, James and Ceri allow the staff to keep any replacements from the sixth week of AI.
Like the cashflow timing benefits he sees in palm kernel over making silage, James reckons on benefits of AI over buying bulls.
“You’re not outlaying money on bulls back in October when cashflow can be low.”
There were definite days in milk advantages to the SGL programme and benefits for cows in increased time from calving to next mating.
“There’s probably savings too by not having bulls on the place with the amount of physical damage they can do,” he says.
At $42/cow their animal health costs were well below the top 20% for operating profit benchmark in DairyBase but have been a focus for the couple.
A 10% lameness rate was an issue in the first and second season but it’s been brought down dramatically to 2.5% by the addition of the second farm dairy, which reduced walking distances for cows as well as the time standing in the yard.
They don’t vaccinate for bovine viral diarrhoea (BVD) based on their own cost benefit analysis. Their herd isn’t BVD naive and when they bring in bulls they make sure they’re tested. Persistently infected animals are identified and removed so they’re not bred from.
They blood test for mineral status with minerals supplied through the water troughs via the dosatron from July to Christmas. Selenium is administered at dry-off and pre- and post-calving.
James says the key is to identify what’s needed accurately so there’s no doubling up of costs.
In their first season James and Ceri employed only three staff on the 1000-cow operation, doing a lot of the hands-on work themselves and making their cows per full time employee (fte) figure 227 and their MS/fte 89,770. Both figures are well above their benchmark group but in the longer term may not be sustainable.
This season they have four staff but cow numbers are at 1600 so with James and Ceri’s input cows/fte are still high.
They’ve employed high-quality staff and recruit on attitude, not necessarily skills.
Damien, for instance, had never milked a cow when he joined them three years ago but he had managed people and had a great aptitude for the practical aspects.
‘We use DairyBase too so we can benchmark ourselves and see the points of difference with others, see where we can lift our game.’
Roger has been milking cows in New Zealand for six years since arriving from The Philippines and has recently gained NZ citizenship.
Both units were ahead of targeted production leading up to Christmas.
“We pay well for fewer staff and get really high-quality people,” James says.
As sharemilkers at their stage of life they admit there can be a risk of being too involved in day-to-day operations, but they’ve also taken opportunities to put their heads up, entering the Dairy Industry Awards where they won the first time entrants award for Canterbury-North Otago in 2013 and came runners-up in 2014.
Budget cows give a start
James and Ceri started sharemilking in the middle of the global financial crisis – something they say really honed their financial skills.
“We had to jump through a lot of hoops to get into sharemilking and that meant we had to have a really robust system,” James says.
Every line of the budget was scrutinised and still is.
They also took opportunities, especially when times were tough.
Because they knew exactly where their cash position was at all times they could react quickly.
Stock purchases were no exception. They bought their first line of budget cows for $1232/cow average although the BW was good at 110.
Stock agents were in no doubt about the type of animal they were after and the prices they were prepared to pay, and the economics of the time meant good animals were there.
They’ve also kept a good team of people around them and looked to high performing mentors.
Their bank manager Westpac agribusiness manager Nick Martin and accountant Paul McCarron from Brown and Glassford are part of their key advisory group. They interviewed several accountants to find the right person who could help them really drive their business rather than just get their accounts in order for tax purposes.
Their bank manager says they’re well on track to achieve their goal of being in a financial position to could buy 500-cow farm within the next 5-10 years.
Based on their current position and where they want to get to they need 13% annual equity growth year on year. Given they’re well ahead of that, options could open up earlier than they planned even with the bumps in the road that a big payout drop like this year’s can create.
“We want to be in a position where we have a few options for growth. We’ve got great staff and maybe the next step is to work with them,” James says.
Creating another sharemilking company is an option, as is the possibility of buying the cows in the contract milking side of their business.
Ultimately they want to be in a position where they can have an asset that brings them a passive income but in the meantime they’re prepared to work hard to get it.
Key points
Location: Culverden, North Canterbury
Farm owners: Peter and Ruth Mossman
Sharemilkers/contract milkers: James and Ceri Bourke
Total area: 520ha
Milking platform: 450ha
Cows: 1600 crossbred and Jersey-cross
Production: 620,000kg MS
Supplements: 350kg DM/cow
Farm dairies: two 54-bail rotaries both with automatic cup removers and Protrack
Irrigation: Pivot irrigation.
