Analysing scenarios isn’t something 50:50 sharemilker Scott Evans just started doing when the payout headed south, it’s part of how he operates.
“I think a lot of farmers would be like that wouldn’t they? You’re always looking for ways to improve and get things really humming,” Scott says.
The difference between Scott and a lot of farmers, though, is his analysis goes well beyond a few sums scratched out on the back of an envelope or even a spreadsheet.
He might start there but after more thought and number-crunching he’s ready to put those scenarios through their paces in a much more robust way when farm consultant Helwi Tacoma from Intelact turns up for his scheduled visits.
It doesn’t happen every month, but since Scott and wife Leone began sharemilking three seasons ago they’ve lived the volatility roller coaster when it comes to payout forecasts.
It’s meant Helwi has put the farm system model Udder through its paces repeatedly with Scott and Leone as they test out various farm system setups and what-if scenarios.
What does happen every month is a review of where they’re at compared with their plans.
Budgets season to date, cashflows and feed plans are all monitored closely monthly.
“You have to do that – how else will you know if you’re on track?” Scott says.
The couple sharemilk for Scott’s parents, Grant and Judy, on their 311ha property just east of Oxford in north Canterbury.
Scott’s a qualified builder but six years ago the couple decided to return to the farm.
Opportunities in dairying were looking good and despite the current downturn, Scott’s still brimming with enthusiasm.
“Sometimes people say hell you’re a happy wee bugger but the fact is I’m not happy the payout’s where it is but I do know exactly where our business is at and where it should be.
“I’m focusing on what I can control and making decisions with the information we record and measure.
“I can’t stand not knowing – that’s when I get stressed out.
“I’d never build a house without following the budget and monitoring it so I really don’t know how you’d run a farm business without doing that.”
Scott worked for wages on the farm for two seasons then stepped up to manager before the couple embarked on sharemilking 1250 cows in the 2013-14 season.
They owned 750 cows and leased the other 500 from Grant and Judy.
This season they own all the cows, getting there by rearing extra heifers, selling all but the replacements for export and some savvy buying and selling of R1 and R2 heifers.
In their first season they peak-milked 1215 cows and wintered all stock off. It was a great year to bank profits but like most farms their costs were relatively high.
They finished the season with farm working expenses in their sharemilking business of $2.94/kg milksolids (MS).
That was partly because of first-year costs associated with starting up the business, but high feed input levels were also a factor.
They used 1050kg drymatter (DM)/cow of bought-in feed – grain, grass silage, maize silage and molasses – to produce 535,000kg MS, equivalent to 440kg MS/cow and 1720kg MS/ha.
During that first season they were able to defer some payments to Grant and Judy so they fell in the next financial year, enabling them to buy stock.
At that point everyone thought they were in for another high payout year but Fonterra’s early season forecasts for 2014-15 of $7/kg MS soon came unstuck. Unfortunately Scott and Leone were also grazing extra cows at the start of the season for Grant and Judy’s new conversion which wasn’t quite ready and their home-grown feed supply was put under pressure.
The deferred costs were no longer welcome given the farmgate milk price eventually landed at $4.40/kg MS.
While the situation was working against them, Scott knew exactly where they were at and the focus was on cutting costs.
They’d budgeted on buying in 1500kg DM/cow of supplement but cut that back to 1200kg DM straight away.
Farm working expenses dropped to $2.65/kg MS – not quite the $2.51/kg MS budgeted, but that was largely because of reduced production.
Scott and Leone’s herd was made up of 700 heifers and 550 cows as they worked on moving from leased cows to owning the whole herd.
During the season they had the opportunity to sell 200 R3 cows for good money and their initial plan was to repurchase cows at a cheaper price.
“But then I decided to keep the money rather than replace them straight away.”
At the same time payout had spectacularly dropped away and Scott decided it was time to go beyond costcutting and look hard at the system they were running.
So it was back to Udder to run through the options.
His thinking process had initially been about questioning not just the level of costs but the underlying system or activity.
“Feed was our biggest cost and wintering was our biggest feed cost so I looked at how we could do that better.”
They’d grown a small area of fodder beet on the milking platform that year to transition cows for winter so they ran the numbers at various stocking rates for going the next step and wintering-on.
“We ran the model to look at wintering all cows off, half on, all the mixed-age cows on or the heifers on.
“Once you’ve got that information the solution’s much easier to find.”
Dropping 100 cows out of the system stood out as the better option but the next step was to run some cashflow models based on the timing of various costs and returns to really pin down what would give them the best overall outcome.
They settled on peak milking 1060 cows and wintering all cows on apart from young stock.
Taking out 22ha more for fodder beet in time for this winter meant cow numbers had to be down, given fodder beet takes out the paddocks from October through to the following late spring.
Wintering-on savings won’t come in until the coming season’s budget but that, combined with a move to leasing a block from Grant and Judy to rear their young stock and the drop in bought-in milking supplement, will translate to savings of 7c/kg MS.
Total budgeted farm working expenses for this season are down to $2.10/kg MS but next season will drop even further to $1.94/kg MS as the full benefits of the new system flow into the financials.
That’s based on budgeted production of 478,000kg MS which is down from the 491,000kg MS they expect to do this season because of reduced supplement.
Scott’s budgeting on using 520kg DM/ha of bought-in feed in 2016-17.
Fewer cows will allow the farm to operate with half a labour unit less – shaving a further 5c/kg MS off costs for the coming season.
They’ve drastically cut their grain inputs to about 135kg/cow – in 2013-14 they were up at 540kg/cow.
Scott’s not prepared to cut it out altogether as he believes the ability to selectively feed individual or groups of cows in the farm dairy means he can get lighter and younger cows back into good condition sooner in the spring.
But he is cutting out palm kernel, focusing more on forages he can grow himself such as maize and grass silage and fodder beet.
“When we do this it’s not necessarily about going for the system that’s the cheapest to run.
“If that’s all it was about then we’d just use palm kernel alone this season.”
The system has to fit with their values too.
It’s an important thing to think about when what you’re doing is working out how you’re going to farm – what your day looks like every day.
The cut in supplements overall will be counteracted somewhat by the additional home-grown pasture they’re producing.
Grant says while he grizzles a bit about Scott’s undersowing programme that includes clover and plantain in the seed mix he has to admit it works well as a cost-effective way to keep pastures going for another two or even three years.
They’re in a grass grub area and getting persistent pastures is difficult.
Scott’s pushed a pasture renovation programme and that’s also paid dividends.
“He’s doing a great job with pastures and growing and harvesting a lot more feed,” Grant says.
“One of the benefits of this payout is we’re all getting back to the basics of growing and using as much grass as we can.”
He’s been farming for 40 years and says he’s been through several downturns like this one.
“They don’t last – you have to remember that.”
His advice is to learn all you can and remember the lessons of being pasture-based.
“We’ll come back as better farmers.”
While Scott’s attention to pasture management hasn’t just come about as a result of the fall in payout and adjustment of their farming system, it’s a critical part of successfully executing that new system.
Helwi has calculated that pasture harvested has lifted from 11 to 14 tonnes DM/ha/year under Scott’s watch and sees no reason why it won’t get to 16t DM/ha/year.
Before any major system re-design it’s important to take stock of where you are and look for any low-hanging fruit first.
As part of that Scott had the pivot irrigators tested which resulted in some re-nozzling and better irrigation efficiency with more accurate, even distribution of water and improved pasture growth.
Fertility has also been improved, mainly through adjusting the pH.
He’s invested in his people, making sure his four staff are well-trained so they can accurately assess and allocate pasture.
He spends one-on-one time with his herd managers making sure they can assess pasture covers accurately by eye.
Just as important as weekly farm walks and daily assessment of pre-grazing covers and post-grazing residuals to create a feed wedge is the ability to assess the growth stage of the pasture.
The ideal time to graze the pasture is when the ryegrass plant is between the 2.5- and three-leaf stage. That’s when the plant growth and quality are optimised.
Grazing too soon means giving up pasture yield while grazing beyond the third leaf means giving up quality.
Cows need megajoules of metabolisable energy, not just drymatter.
At different times of the year the time from one leaf emergence to the next varies so it has to be monitored.
“Not all pastures will be at the same leaf stage when they’re at the same height which is why it’s so important to get in and actually look at where it’s at before allocating paddocks.”
Monitoring what’s going in the vat is also an indication of feed quality and how well they’re being fed.
He has whiteboards in the farm dairy where the grazing plan and work plans are broken down into 12-hour blocks.
“I have to make sure staff know what I know. That’s essential,” he says.
All the planning in the world and the best systems analysis is only as good as the execution.
Farm facts:
Owners: Grant and Judy Evans
50-50 sharemilkers: Scott and Leone Evans
Area: 311ha
Cows: 1060 peak milked
Production: 491,000kg MS
Supplement: 700kg DM/cow, 520kg DM/cow in 2016-17
Farm working expenses: $2.10/kg MS, $1.94/kg MS in 2016-17
Wintering: Mixed-age cows wintered onfarm
Winter crop: fodder beet on 22ha
Autumn crop: fodder beet on 10ha grazed as milking supplement
Young stock: Grazed on neighbouring lease block
