The aim is to identify possible areas for improvement to help drive the business towards greater profitability, keeping in mind LUDF has its own self-imposed rules such as no inductions and a requirement to reduce its environmental footprint.
In 2009 a study of 14 top performing farms, including LUDF, found that pasture eaten and operating costs were the two factors on their own, other than payout, which had the greatest influence on profitability.
South Island Dairying Development Centre executive director Ron Pellow said pasture eaten was the first number he looked to as a driver of the business.
Pellow said from his observation across the benchmark farms and other high performers, it was those who stuck to the basics but reacted and responded quickly to opportunities or challenges who were the most profitable.
“Typically they’re fast movers rather than people who sit back and hope it comes right.”
LUDF is budgeting on feed costs of nearly $1/kg MS this season with its lower stocking rate and reduced input plan.
Pellow said LUDF’s breeding costs, at 0.19c/kg MS or $83/cow, were higher than its benchmark cohort and may be an area for further analysis in this low payout season.
The farm uses more artificial insemination than others and rears 200 heifer calves through to weaning as it waits for DNA testing results.
“We think the extra money we spend on replacements is offset by the productive gains we make in the herd and premiums we can achieve in stock sales, which don’t show in simple expense comparisons.”
Production per labour unit or hours worked was also a number Pellow viewed as an indicator of the farm business’ efficiency.
“Labour’s a big cost on many farms and that number can give a good clue as to how well the farm systems are running.
“Return on asset isn’t a metric on its own that drives us but the essence of what determines it does. It’s more about generating the profit that results in that metric.”
