Although the farm still sets lofty operating profit targets, the path it’s taking to achieve them has changed. Operating profit is budgeted at $3700/ha this season with operating costs at $4.40/kg milksolids (MS).
To limit leaching losses but achieve the production necessary to reach the profit goals cow numbers have been cut to 560 from 630, bringing stocking rate down to 3.5/ha from 3.94/ha, and bought-in feed is restricted to 300kg drymatter (DM)/cow (Dairy Exporter, June, page 44).
South Island Dairying Development Centre executive director Ron Pellow said the profit targets were highly dependent on achieving 500kg MS/cow and 1750kg MS/ha.
“If we drop production by 2% we start eroding that profit very quickly; if it falls short by 5% we start sliding down a very steep hill,” he said.
New regional council environmental rules limiting nitrogen leaching in Canterbury came in mid-way through last season. Although the council did not enforce them immediately the farm operated as if they did, partly as a demonstration of their effects and also as a way to help find solutions for farmers. It cut the stocking rate by drying more cows off early in autumn, enabling it to closely balance feed demand with autumn-grown pasture rather than rely on supplements.
But that meant the farm fell 8% short of the production it had previously been on target to do, with the net effect an estimated financial cost of $85,000-$100,000 in lost profit. Pellow said lower production over the latter part of the season inflated farm working expenses and operating costs on a kg MS basis.
Farm working expenses were $4.28/kg MS, up from closer to $3.90/kg MS over the past three years. Operating expenses climbed to $4.70/kg MS.
Achieving profitability targets in a sustainable way has been the end goal for the farm since its start. To meet its own targets, that consistently put it among the top 5% in the region and country, it’s focused on maximising the amount of high-quality pasture grown and eaten while keeping tight control of costs.
Typically cows have eaten about 17 tonnes DM/cow/year but last season that dropped to 15t DM/cow.
‘If we drop production by 2% we start eroding that profit very quickly; if it falls short by 5% we start sliding down a very steep hill.’
Production was back to 440kg MS/cow compared with 477kg MS/cow the year before and on a hectare basis it fell to 1725kg MS/ha compared with 1878kg MS/ha the season before.
Thanks to a record payout, operating profit was expected to be $7578/ha and return on assets 10%, up from 6-7% in the past four years but on a $6/kg MS basis it would have been nearly $900/ha less than 2012-13 season.
