It is a shame more focus isn’t placed on the significant number of farmers who, even though they are carrying plenty of debt, will still be able to at least break even this year.
With the sharp drop in milk payout, the average farmer will be carrying around $20kg/MS of debt, equating to around $1.20kg/MS interest a year. As a result, they need to be well under $3 farm working expenses to have a chance to break even.
If you believe all the talk in the media you would think this was impossible. So as a means to provide some encouragement (and in no way attempt to boast) to those out there looking for a way through the seemingly dire situation, this is our experience.
When we bought our 332-hectare farm (250ha effective) in 2013 we had the opportunity to start from scratch in terms of what sort of farm system we wanted to implement. On our previous farm which we had owned for 11 years, we had, to some degree, gone down the intensification route. We built a feed pad and bunkers, were buying in a considerable amount of feed and upped the cow numbers.
It certainly felt like we were making progress. Each year the production increased and there was a feel-good factor of seeing the cows munching away happily on the pad even on a wet muddy day.
However, the extra hours in the cowshed and on the tractor took a real toll. If I wasn't feeding out, I was dealing with all the extra effluent and constantly pushing the grass with urea and projib.
Equally significantly, despite the extra production, profitability was only on a par with the previous years when we had a practically all-grass system.
So the decision was made to adopt a stocking rate of a relatively low 2.6 Friesians a hectare (650 cows in total) on the new farm. This was done for four key reasons.
First, it was imperative to attract and retain good staff, so milkings had to be kept to a maximum of two hours. So 650 was the maximum we could do in our 50 bail rotary.
Second, this stocking rate allowed us to grow 30ha of summer crops a year which meant we were self-sufficient for practically all our supplementary feed. (A small amount of PKE is fed to get minerals into cows during the calving period, through in-shed meal feeders installed by the previous owner).
Third, wintering is a breeze at this stocking rate. It allows us to achieve a long lactation by calving early, dry off late and also to milk a few cows through the winter at a premium.
And fourth and most relevant to the current financial climate, it is such a low-cost sustainable system.
It is sustainable because we don’t need to throw huge amounts of urea around anymore and at that stocking rate it does wonders for the numbers coming out of Overseer.
For the first eight months of this season we are running at $2.25/kg on the production done to the end of January and will comfortably come in at under $2.50 for the season. This comes without scrimping on essentials like maintenance fertiliser, AB and wage rises for the staff. We have relatively high debt so the interest bill and drawings adds another $2 on top of that to make total cash expenses of about $4.50.
With our net stock sales equating to about 60 cents kg/MS, our total income will be around $4.50 kg/MS, with the milk price of $3.90. So we will break even this season.
The key factor to this low-cost system is the stocking rate which some people call low, but I term appropriate.
Even at $28 a kilo of debt we can ride out the current cycle (however long that may last), without having to run to the bank for extra money.
It has taken a bit of guts to do it. Rather than achieving a squillion MS a hectare, you have to be content with around 1000 kgMS/ha. Rather than doing 500-600 MS a cow, you settle for 400. When you go to discussion groups you’ll probably be doing less than everybody else, so you have to stay mentally strong. When the cows drop due to seasonal fluctuations, you have to resist the urge to ring 0800 MEALTRUCK.
We have found using this system a low-stress, low-footprint and rewarding way to farm.
I believe this system is a great option going forward. Who knows how long the current situation will go on for, especially if this is the new normal as some have suggested. I’m certainly hopeful that it isn’t the new normal but I believe it would be foolish to assume otherwise.
One thing is for sure, businesses that are light on their feet will best be able to adapt to the volatility we all know is here to stay.
- Bryce and Christine Anderton milk 650 cows on a Waikato dairy farm.
