Added to that has been the GlobalDairy Trade auction results that through spring gave a glimmer of hope and meant some eased up on the brakes slightly.
The subsequent falls in auction prices put the pressure back on, with a tense eye on forecasts of El Nino weather and a summer dry.
Most budget decisions paid off, as did the determination to keep the cheque book closed, but for a few the knife cut too deep and savings haven’t been converted to profit, consultants say.
That’s because, in those cases, the impact on production has been greater than the savings made.
Wairarapa-based dairy consultant Chris Lewis of Baker and Associates said at the outset of the season, as payout plummeted, he was working with clients and in many cases reviewing their systems.
About half decided to cull later-calving cows and get stocking rates down.
Others went back over budgets, shaving costs with a common strategy to drop down a level on DairyNZ’s system scale and review again later in spring.
People who’d been sitting at a high system three to a system four reduced their supplementary feed budget to position themselves closer to a system two or three.
Those who were already modestly stocked tightened their budgets where they could.
“Now layer over that the seasonal effects and a slow start to the season for some. In areas like Manawatu and Southland there was real concern with a lack of pasture cover and slow growth.
“Some decided to keep to the budget and didn’t go out and purchase any extra feed and they’ve taken the hit in the vat.”
“Arguably that’s good behaviour and for those where savings exceeded the reduced milk income it was,” he said.
When setting up the farm system it’s all about finding the sweet spot, Lewis said.
“It’s about what’s right for your farm and your situation and finding the balance of income and expenditure. Farmers have been prepared to drop some production if it means operating costs are going to drop more than revenue.”
“Dropping production hasn’t been a comfortable conversation to have before.
“It’s been a bit of a taboo subject but farmers are more open to that and more prepared to take a look,” Lewis said.
The caveat was to ensure system changes and cost-cutting resulted in an improvement to the bottom line and didn’t significantly risk the business into the future.
FarmWise consultant Brent Boyce agreed and said full analysis was critical.
“Unfortunately we know of people who didn’t do that and heeded calls for cost cutting to the point they went too far.
“With any of these cost-cutting decisions, keep in mind the Jerry Maguire quote – ‘Show me the money.’ You’ve got to do the numbers and actually analyse these decisions properly,” he said.
The cold spring had challenged many, particularly in the South Island and those who hadn’t responded where necessary to ensure cows were fed well with enough high-quality feed had seen peak milksolids production losses that could be in the order of 0.4kg MS/cow/day.
For the sake of 1-2kg/cow/day of palm kernel over a critical period some of those farmers could have been a lot better off, he said.
Boyce favours mowing when necessary, and said farmers who kept the mower in the shed when weather caused pasture quality problems had exacerbated the problem and experienced drops in milk production.
However, he and other consultants said generally farmers had taken a better approach to pasture management this season and that focus would hopefully roll on into future seasons.
“We’ve got to make sure we’re growing and harvesting as much high-quality grass as possible – that’s always going to be our major profit driver.
“We’ve definitely seen people heeding that message,” Boyce said.
Southland dairy consultant Ivan Lines said some farmers had also gone too far when it came to wintering and young stock grazing off decisions, sowing winter crops on the milking platform to accommodate the whole herd.
While it can work, that kind of system change needed to be analysed carefully as it had an effect on two seasons’ production not just one.
In some cases farmers have structurally altered their business, selling support land in favour of leasing.
Some have also sold all young stock as a short-term cash injection and cost saving but will face an extra cost going into next season.
Looking ahead
Now is the time to make plans for the second half of the season and be prepared for the effects of El Nino.
Consultants say protecting cow condition for next season is non-negotiable and farms should have a plan A and a plan B so they’re ready for what the second half of the season throws at them.
Do the numbers on each taking into account savings, the effect on milk income and how cow condition and pasture cover targets can be met, they say.
Tools over summer and autumn include culling empty cows early based on pregnancy test, production or animal health results, altering milking frequency to once-a-day or 16-hour milkings and drying cows off.
Paying attention to detail, looking after equipment and continuing to monitor and manage pastures closely will also create efficiencies and minimise unnecessary costs.
Farmers must weigh up the risks and opportunities of actions taken early in the New Year if summer is followed by a good autumn.
Those factors would vary depending on the farm’s situation.
Fertiliser applications deferred till the end of the season might be cancelled altogether if pasture fertility levels allowed but the risk of affecting next season’s production should be taken into account.
Wintering and grazing decisions should have been made by now but there could be room to tweak numbers grazed at home.
Crop yields will have to be monitored closely so farmers can act early if yields are hit by a dry summer.
The big savers
Feed and fertiliser are the big budget savers this season with repairs and maintenance, breeding, animal health and vehicle costs also being trimmed, farm consultants say.
Wairarapa-based dairy consultant Chris Lewis said among his clients and the benchmark Dairy Systems Monitoring (DSM) group feed costs had dropped 30-40c/kg MS with people sitting at or below $1.30/kg MS.
He analysed feed costs versus profit and found a relatively strong relationship but he’d found an even stronger relationship between non-feed costs and profit indicating farmers needed to maintain tight control across the board.
Lower stocking rates, better pasture management, reviews of feed input levels and use of lower-cost supplements contributed to reduced feed costs, consultants around the country report.
Farmers in Waikato and Bay of Plenty have slashed their bought-in maize budgets with many growing their reduced requirement onfarm.
Among the DSM group, fertiliser costs had dropped by about a third with phosphate fertiliser cut right back.
Others found a similar trend.
FarmWise consultant Brent Boyce said many farmers had deferred significant amounts of phosphate fertiliser with some waiting till March to make a final decision on whether to apply it.
For those with adequate phosphorus levels it could be a cost-effective move but for those without it might push some of the pain into next season.
Sulphur, potassium and nitrogen were still being applied.
FarmWise consultant Ken Bartlett said rains in Waikato and Bay of Plenty in November meant any nitrogen applied then should have seen good response rates and a surge in pasture growth that would help going into December and January.
Decisions to cull late-calving cows, reduced stocking rates and a better focus on pasture management meant in most cases mating performance had improved, he said.
“So we’re seeing improvements in onfarm efficiencies that will have a carry-over effect and be a good thing,” he said.
Lewis said repairs and maintenance costs in the DSM group had halved with savings also being made in areas like animal health and weed and pest control.
There were mixed reports about savings in wages although most said those who made big cuts tended to put themselves and their teams under pressure, leading to fatigue and poor decision-making.
Complying with minimum wage and holiday requirements, and an increased awareness of health and safety, meant there was limited scope to reduce staff numbers.
Keeping on track
Farmers who have achieved feed cost savings without compromising production are generally on track in terms of budget to date, bankers and consultants say.
ANZ general manager agri Ross Verry said by late November cashflows were mostly in line with forecasts made at the start of the season, so most banking facilities hadn’t needed to be revised.
“It has been a difficult spring climatically in many parts of the country and the possibility of a dry summer underlines the importance of continuing to plan ahead though.
“We’ve been impressed by some of the cost reductions farmers have achieved, usually by refocusing on pasture management,” he said.
He encouraged farmers to continue to examine costs, but also to be open to investing in areas that will improve efficiency and performance medium term.
“One thing we found useful is for ANZ agri managers to workshop real farm management choices with expert farmers and advisers. They found there are usually very good options, if they are planned carefully and if farmers draw on the best-possible advice.”
