The programme gives farmers the potential to earn an extra 20 cents/kg MS premium on top of the milk price by meeting 31 standards, including 13 mandatory ones.
The standards are based on the five pillars of Te Ara Miraka – people, environment, cows, milk and prosperity. Each standard has a rating and farmers will receive a score out of 100 at the end of the season, which is the percentage value they will get paid of the available premium.
Farms will be audited and scored by an independent third party, with a governance structure in place for farmers to appeal or review their scoring.
Peter and Sarah bought their first farm at Whakamaru in South Waikato last year, and it happened to be one of the original supply farms to Maori-owned company Miraka.
They feel fortunate to have the opportunity to supply a company that has invested interest in all aspects of their business success and is prepared to offer financial incentives to support the regulatory requirements being placed on dairy farmers.
“Honestly, we are excited about the Te Ara Miraka programme. We are already on that journey – our values align quite closely with theirs,” Peter says.
“It’s nice to get something for your efforts, it really is.”
Valuing the different areas in your business, such as health and safety and environmental initiatives, is part of being a modern-day farmer.
“You’re running a business; you’re not just milking cows and growing grass.”
The programme will require extra administration, but they already have integrated many of the standards into their business. For example, they have been in DairyBase for years, have an active health and safety policy, appropriate employment contracts and complete six-month performance reviews with their two full-time staff.
They are achieving two-thirds of the standards and with a little bit more effort they should be able to tick off a few more on the list, such as recycling plastics and measuring soil moisture ahead of effluent application.
“Depending on how hard the independent auditors score, we are optimistic we can get 90%,” Sarah says.
That could equate to a possible $40,500 extra in their pockets this season if they reach their production target.
It’s commonsense to want to achieve most of the standards even without the added incentive because it means extra profit and efficiency in their farming business anyway, Peter says.
For example, achieving the industry target for the six-week in-calf rate equates to 1 cent/kg MS premium for a Miraka supplier under the incentive programme, but the real benefit for farmers is a compact calving and more milk in the vat by Christmas.
In a low payout cycle for the dairy industry, farmers are trying to cut costs where they can. This programme gives farmers the ability to retain annual tasks such as herd testing that can aid their farm performance.
Peter and Sarah didn’t herd test last year to save costs, but this season herd testing is worth an extra 1 cent/kg MS. Another standard to target is to be grade-free, which is worth another five points or 1 cent/kg MS, with bonus points for a low mean somatic cell count.
Financial rewards for maintaining high milk quality puts extra incentive on ensuring farm systems are in place, plant equipment is maintained and people are upskilled.
The overall message of the Te Ara Miraka Farming Excellence Programme is excellent because it is incentivising good practice on farms, Peter and Sarah say.
The couple plan to grow their business through a multi-farm operation, possibly involving equity partnerships, and the programme further inspires them to maintain best-practice standards to prepare for those opportunities.
“It’s guiding us towards best practice in areas we may have overlooked. Farmers have clear targets to aim for.”
Peter and Sarah were previously 26% equity partners at Maihiihi, Otorohanga in a multi-farm partnership with Peter’s family.
Peter and Sarah both have Massey University bachelors degrees, in agricultural science and business respectively.
After starting out as contract milkers and then moving to 50:50 sharemilking and growing their herd from 330 to 660 cows, the couple bought into the equity partnership of 1100 cows, and had a 200-cow sharemilking job, with Peter working in various operational roles across the different properties.
After six years they sold their share in the partnership to buy the 215ha farm along with 516 cows. They also had 54 R2 replacements on the ground and 78 R1 grazing.
Their debt to equity ratio is 68%, growing slightly more than they had originally budgeted on because of the low milk price this season, Peter says.
They also invested in some capital development in their first year including a new calf vat stand and calf shed.
They remain focused on their farm working costs, but more importantly they monitor the breakeven milk price for their business.
“Our breakeven milk price is $4.50/kg MS after drawings, which is quite low.”
They hope to reduce farm working expenses to $3.15/kg MS this season, but Peter is free labour which is about 30c/kg MS that hasn’t been factored into their costs.
They have multiple folders of budgets they continually adjust, which in a low payout cycle will only make them a more resilient business, Sarah says.
They have established a flexible System 2-3 operation onfarm, buying 0.6-1 tonne supplement/cow/year. They feed palm kernel through their in-dairy feeding system and buy hay for the winter. This year they planted 7.5ha turnips, 8.5ha chicory along with 10.5ha kale and 14ha oats for winter. Peter bought a seed drill to be able to direct-drill most crops where he can. Being able to do the work himself and not having to heavily cultivate paddocks is both a financial and an environmental saving, he says.
Moving to the new area they weren’t sure how the seasons would play out so they bought a herd from Reporoa which had a later calving date and another herd from Te Puke.
Realising they could push calving forward, they decided to condense the calving spread and brought the calving date forward a week to July 23, which pushed their empty rate up. They aim to get that to less than 10% this season. They kept the artificial breeding mating to four weeks, with an extra two weeks using short-gestation Hereford while also running Friesian bulls with the cows.
“It took the pressure off having to catch all the bulling cows,” Sarah says.
The system worked well. Any cows in-calf during those two weeks were not replacement calves so it didn’t matter what they got in-calf to and it’s something they will repeat this season.
The ash-over-pumice soil farm is 60% flat, 35% moderate hill and 5% steep enough to fertilise by helicopter. They maintained their fertiliser programme for the 2015-16 season because they saw more opportunity in feed grown versus costs.
“My father always said it was a rich farmer who could afford to not to put on fertiliser,” Peter says.
They average 140kg N/ha, with 20-25kg N/ha rate applied throughout the season. The farm’s nitrogen leaching is estimated to be 44kg N/ha.
The farm is in the Upper Karapiro catchment and the Healthy Rivers: Plan for Change draft due to come out later this year will impact their nutrient limits.
Te Ara Miraka sets standards to reduce nitrogen and phosphorus leaching, along with standards for effluent application and recording, which will help them prepare for any rule changes.
When they first bought the farm they had to interview with Miraka in order to continue supplying the processor. It was a relatively informal process where they were asked about their farming philosophies, which turned out to be questions based on the five pillars of Te Ara Miraka; people, environment, cows, milk and prosperity.
One of the key differences they’ve found supplying Miraka is the personal approach and feeling of inclusion, despite it not being a co-operative.
New suppliers, Miraka staff or any subsidiary business becoming involved with the company are officially welcomed through an event at the marae, which was a great experience, Peter says.
“What I took out of that was people really enjoy being part of the business.”
Watching the Taupo relay several weeks later, which Miraka had a team running in, chief executive Richard Wyeth approached Peter to say hello. Peter was surprised he knew who he was.
That is an example of the cultural approach the entire team at Miraka has with its suppliers and their customers, Peter says.
“What’s special about Miraka right through the business is people take time out to build relationships with their suppliers.”
When Miraka announced the Farming Excellence Programme they took the time to have genuine interaction with suppliers and listened to feedback, he says.
“They have a really strong emphasis on relationships. They know all their suppliers by name. You feel valued. I think they genuinely listen to their suppliers.”
The Farming Excellence Programme will be an excellent tool to help Miraka sell their products globally on the back of a really good story, but the story has to be true, Sarah says.
Miraka has to ensure their farmers are meeting its values, which is where independent auditors come in.
“They have brands and reputational interests they want to foster so they can’t have their suppliers being rogues,” Peter says.
The programme will take some time to be ironed out and will need to be reviewed as more farmers start operating best practice and it becomes status quo.
Supplying Miraka as first-time farm owners last year, their nerves were somewhat helped by knowing Miraka would pay an extra 10c/kg MS on top of Fonterra’s final milk price.
“We felt reasonably exposed, first year into a new farming venture, reasonably high debt and we needed to be sure whatever we were going to be receiving for payment for our milk was going to be competitive at the very least.”
This season Miraka has changed its policy and will set its own milk price. Peter and Sarah hope they will set a competitive base milk price and that the additional 20c/kg MS incentive will be the cream on the top.
Farm facts:
Farm owners: Peter and Sarah Walters
Location: Whakamaru
Area: 200ha effective
Breed: Friesian crossbred
Crops and pasture harvested: 12.9t DM/ha
Dairy: 40-aside herringbone, no automation, in-dairy feeding
Effluent irrigation: 70ha
2015-16 2016-17 Targets
Peak cows: 550 peak 565 peak
Production: 203,000kg MS 225,000kg MS
FWE: (Peter is a free labour unit) $3.55/kg MS $3.15/kg MS
