Less than 10 years ago they were not only newcomers to dairying, they were also new to the country.
Kenneth, originally from Scotland, and Catherine, an Australian, got together during their respective overseas travels but decided New Zealand was the place to pursue their farming career.
While Kenneth’s family are farming in Scotland his two brothers were already back on the home farm by the time he and Catherine were ready to settle down and the pair decided to look to NZ for their progression opportunities.
They’ve been here since 2007 and after a short spell working on a sheep and cropping property near Dunsandel took up a job with what was then Synlait Farms, now Purata.
Kenneth was a self-confessed novice when it came to dairying but he was keen to learn and relished the procedures and policies and learning opportunities he was exposed to with the corporate farming entity.
Before long he moved up to a management position on Synlait’s 600-cow Decade Dairies in Ashburton and then he and Catherine had their proposal accepted to contract milk on the same farm.
Just before they started as contract milkers they did DairyNZ’s strategic planning course as part of Mark and Measure.
Kenneth was already on board with the strategic thinking approach to business, having earlier completed a post-graduate diploma in agribusiness management at the Scottish Agricultural College in Aberdeen.
Catherine, a trained nurse, was busy with their young children but was also keenly interested in dairying and progressing in the industry.
The Mark and Measure course was a chance to expose Catherine to the business side of farming, Kenneth says.
Strategically that in itself was fantastic for their business progression because Catherine took on a more defined role in the administrative, human resource, health and safety and financial planning and monitoring of the farming operation.
Kenneth says it let him get out of the office more and concentrate on pastures and animal health, ensuring farm performance was hitting the targets they set.
To help formulate their vision statement during the course they each drew a picture of what they wanted life to look like and, apart from Catherine’s picture having a holiday bach, they were the same.
They were clearly on the same page about where they were heading and set their vision statement to encompass their journey towards financial freedom.
They identify their farming business in their vision statement as their vehicle to that financial freedom because by developing it to its potential they can provide choices for themselves and their four children.
Ultimately owning a farm is a goal but it’s not specified in the vision statement and might not even be a dairy farm.
A well-planned and growing farm business operation could give them the financial freedom they want and the all important time to enjoy it.
With that in mind they identified six focus areas they considered key to achieving that vision; focus areas that encompassed all the aspects in their life that would give them the balance and life they wanted.
They included:
- business growth
- farm performance
- family and relationship
- networking
- off-farm diversity
- time management.
“They’ll be different for everyone because they’re personal to your situation. We had to think pretty hard about what each would be – where we’d have to put our focus,” Kenneth says.
Within each focus area they set goals they considered achievable but that would push them that extra step. They were largely time-bound and either had number-based measurable outcomes or were very specific so it was clear whether they’d achieved them or not by a certain date.
Each goal then had actions associated with it – actions that were relevant to the current situation and again were specific.
“Dream hard; work smart,” Catherine says.
They wanted a minimum of 15% annual equity growth as a business growth goal and at that stage recognised purchasing young stock and producing a healthy profit each year were key actions in achieving that.
So they specified they would buy 75 artificially bred heifers at an appropriate price by September 25 in both 2011 and 2012.
They recognised achieving a healthy profit and budget targets required close monitoring so business growth actions included a monthly meeting to check actual spending against budgeted numbers and cashflows.
They also committed to acting on that information and making adjustments as necessary so they remained on target.
A third action related to regular communication with their accountant, banker and other industry professionals, not just to keep their finances on track but to help them identify new opportunities to grow.
Kenneth says they knew 50:50 sharemilking was the best business structure to achieve their business growth goals but he also knew people were finding it harder to secure the jobs.
So they made networking a focus area and set a goal to make a specific number of new business relationships each year.
To achieve that they attended field days, joined discussion groups – including DairyNZ’s Biz Start and Biz Grow groups – and attended the South Island Dairy Event.
They also entered the Dairy Industry Awards – an action they say helped with several goals and one they highly recommend.
It made them take stock of where they were at across a whole range of aspects in their farming business, justify what they were doing and then gave them the chance to benchmark themselves against their peers.
It also gave them a way to network.
It was a valuable experience and they were among the top six for Canterbury Farm Manager of the Year but had to withdraw before the final judging because they had to return to Scotland.
They knew to get a sharemilking job they needed to have runs on the board in terms of farm performance, enough equity to buy a herd and good enough networks to hear about the jobs or be shoulder-tapped.
Over the four seasons they were managing and contract milking Decade Dairies they got the bulk somatic cell count down from the 356,000cells/ml to 76,000c/ml, brought the six-week in-calf rate up from 56 to 70% and improved the pastures so cows were consuming 14 tonnes drymatter (DM)/ha/year.
They bought a house in Ashburton using capital they’d brought with them to NZ and were renting it out.
In October 2012 their hard work paid off and a phone call inviting them to apply for their current sharemilking job marked a milestone in their journey.
The 570-cow job wasn’t advertised but they’d been recognised as good candidates thanks to the efforts they’d made.
That’s not to say opportunity comes knocking at the door.
“You don’t just sit back and wait for that sort of thing to happen; you make your own opportunities,” Kenneth says.
The interview was a chance for them to showcase themselves to farm owners Donald and Fiona Sutton and again their strategic planning came to the fore.
They worked with the Suttons’ farm consultant at the time, Ed Tapp from FarmRight, and presented a farm management plan for the property to suggest what improvements they could bring to the business.
The system they wanted to operate was lower cost and lower input than the previous system, with a real focus on pasture management, lifting soil fertility and improving accommodation for staff.
The Suttons liked what they saw and Kenneth and Catherine were offered the job.
It meant they were going 50:50 sharemilking two years earlier than they’d planned but their proven track record, communication with their banker and rural professionals and well set out action plan meant the bank was prepared to back them.
They sold their house in town and over the next two seasons sold all their weaned heifer calves to increase cash flow, reduce their grazing and wintering costs and help pay down debt.
Kenneth says he takes a bit of flack from some people about that because his cows are his asset but for those first couple of years it was a good option financially.
The cost of rearing a heifer, getting her in-calf and ready to join the herd mounts up and can drag on cashflow early on.
Some heifers were sold for export but most were sold through Livestock Exchange to a grazier and then bought back in-calf ready for the next season.
They sold for about $700 and were bought back for $1700 all in the same financial year.
This season they’re able to keep calves out of cows that were calves in their first season and can work on building the breeding worth of their herd so they’re rearing their own replacements and building that asset base.
As it turned out they couldn’t have wished for a better payout year for their first season, with the record high putting them on a firmer footing financially a lot faster.
Unfortunately that scenario was short-lived and while the fall-out from last season’s downturn followed by this season’s payout plummet is severe the long-term outlook for their business is still very positive.
They’ve had to re-do budgets to trim farm working expenses back to $1.70/kg milksolids (MS) and have continued to keep talking to the bank and working in with their farm owners.
They cashflow out two to three seasons and with the latest payout revisions expect to be cashflow negative until 2017.
“But if the payout goes back up to $4.40/kg MS we’ll be back in the black,” Kenneth says.
“Even though we’ll make no profit we’re not making a loss either and we’re growing our equity (because of young stock numbers increasing) so we’re still making progress,” Kenneth says.
The farm elected to make use of Fonterra’s Guaranteed Milk Price (GMP) this season locking in $5.25/kg MS for 23% of the milk.
That’s given them an overall season average milk price of $4.16/kg MS.
For the three seasons they’ve been sharemilking so far, their average annual milk price will work out to close to $6/kg MS.
Year-on-year the couple has managed to achieve their 15% equity growth and are now about to revisit their strategic plan given they’re in their third season of their three-year contract.
They’re keen to renew it and are considering what the next steps are in terms of business growth.
A second sharemilking job involving a staff member and their farm owners could be an option.
Kenneth’s 2IC Eddie Trouson and his wife Nicola are in their third season with them and they’d like to create opportunities for them to progress.
Working all together they could harness the full power of the whole business team.
Thinking and planning strategically is a way of life for Kenneth and Catherine, not just a document.
