Thursday, February 22, 2024

Honesty, numbers underpin profitable Cambridge dairy farm

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Two Waikato couples are proving that, with a shift in mindset, a share-milking arrangement can be a true business partnership.
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Brian Basi and Rachel Bunnik are more than just 50:50 sharemilkers for John and Maria Numan.

They are one half of a business partnership with the farm owners that encompasses the whole farming business for both parties.

It’s built on a foundation of open, honest and accurate communication around financial numbers – knowing those numbers and not making any assumptions, Basi says.

“Any decisions that we make are ‘What’s best for the business?’ rather than ‘What’s best for us?’”

It is their second year as 50:50 sharemilkers for the Numans, running a high input farming system that focuses on maximising pasture utilisation firstly, followed with optimal and profitable usage of supplementary feed.

The couple hosted a field day on their farm organised by the Smaller Milk and Supply Herds group, focusing on how they use home-grown feed in their system.

The farm system is typically a high-input System 4, but last season was a System 5, using 42% of imported feed. 

Basi says they use this system for the simple reason that it’s profitable.

The farm produced just over 150,000kg MS last season, above the three-year average of 145,000kg MS.

The farm is prone to wet weather and last season was extremely challenging with some areas having to be re-grassed at least four times due to flooding damage.

Open, honest and accurate communication around financial numbers – knowing those numbers and not making any assumptions – is key to Basi and Bunnik’s relationship with the Numans.

“The main goal is to provide a good return on capital for us as sharemilkers and for the farm owners as well. As you can see, it’s a pretty nice farm and we were fortunate enough that John and Maria put this up as a sharemilking farm instead of a contract-milking farm,” Basi says.

Mindful of that, it is important for Basi and Bunnik that the Numans get a return on their investment as it keeps sharemilking as a farm progression tool alive.

They moved to the farm in June 2022, operating it together with Bunnik also working part time for LIC as an artificial insemination technician.

Before that they contract-milked for two years in Putāruru for Dick and Liz Johnson.

The Johnsons’ farm was similar in size, system and herd numbers to the Numans’. It was during the 2021-2022 season that they entered the Dairy Industry Awards and won the Share Farmer of the Year title for Waikato along with four merit awards for 2022.

The couple – both in their mid-20s – saw the awards and its judging as a way to get feedback on their business and  goal setting, and to build their networks.

“It was a great journey and although it’s been almost two years since we won the award, it has certainly helped us with our progression and we now assess opportunities with a different mindset. It is forever giving back to us and in turn our business thrives,” Basi says.    

They purchased 90% of their herd from a large herd in Morrinsville, selecting black-looking cows from a Jersey herd, focusing on cows with a good somatic cell count, confirmation, BW and PW.  At the time of purchase, the cows were averaging 410kg MS/cow.

The main attraction of the Numans’ farm was the high-input system, due to the Basis’ understanding of potential profitability and improved return on capital as opposed to just focusing on low cost.

“We understand the value of putting feed into our system and the returns we can generate out of it and making our cows perform all year round.

“Our business goals with what we want to achieve on farm and how we think a farm should run align exactly with what the Numans’ goals are, focusing on total operating profit and sustainability.”

The farm system is still very much pasture focused despite the high levels of inputs used, with farm walks carried out every 10 days and a feed budget used to help decide inputs use.

The day-to-day running of the farm is largely left to the couple, who consult the Numans when required.

The farm system is still very much pasture-focused despite the high levels of inputs.

Farm walks are carried out every 10 days and they use a feed budget to help decide when inputs are used, and how much.

“The bottom line is all driven by pasture first and we aim not to waste anything whether it’s the pasture or the inputs going in,” Basi says.

Those inputs include 5.3 ha of maize grown on farm – yielding 22t/ha in 2022. Weather damage reduced the yield after it was on track for 26-27t. 

They also bring in 516t DM of PKE, 102t DM of imported maize, 63t DM of kiwifruit and 24t DM of golden dried distillers grain (GDDG).

All up, the farm used 22.8t DM/ha in 2022-2023 – including 8.6t DM/ha of imported feed.

They use very little fertiliser to establish their maize crop, preferring to rely on effluent and muck from the feedpad. This reduces costs, with last season’s crop costing 27 cents/kg DM in the stack. 

The paddocks get sprayed, ripped, power harrowed and planted with 200kg/ha of DAP down the spout. 

They also calculate any supplements going into the feed system. If, for example, the budget shows a feed deficit, they will look at what the costs and returns will be in meeting that deficit, Basi says.

“What we are trying to achieve there isn’t maximum profit per cow – because then we could run a lower stocking rate; it’s definitely focused on enhancing the profit per hectare.

“We look at that all year round and that’s what our decisions are based on. We do a calculation and whatever makes the most money, that’s what we go with.”

Brian Basi starts preparing a paddock for maize planting. The farm grows 5.3ha of the crops, which it uses for supplementary feed.

To ensure they do make money from their supplementary feed, they first ensure that cows reach their residual targets daily when grazing.

They feed maize and palm kernel on the feedpad all year round, with larger amounts of maize being fed through the winter and summer months.  

They will also feed out GDDG, but only if they feel the cows have a severe protein deficit.

At the time of the field day in late October, the maize had been reduced back to 0.7kg DM/day per cow and 3kg DM/day/cow PKE as they try to use pasture as much as possible.

That feed cost equates to 46 cents for the maize and 36 cents for PKE on a per kilogram dry matter basis when 95% is utilised. The cows are also consuming 16.3kg DM of grass a day, which is budgeted at 20 cents.

“At the moment, there’s $4.66 going into the cows, including grass at 20cent/kg DM, and [it’s] coming out at just under $9.00/cow profit – and with a stocking rate of 3.8, we’re making about $34/ha of profit per day and that’s for the whole business.”

They base their calculations on a $7.15/kg MS payout.

Their cows 24-hour graze the paddocks. Basi says they aim for a pre-graze of around 2800kg DM. 

From calving to December they try to aim for a consistent target residual of around 1600kg DM. For the rest of the season, they aim for 1500kg DM and use supplements as a way of looking after their grass if residuals get below that 1500kg target.

For Basi and Bunnik, keeping the grass’s base, where it stores its energy, allows it to re-grow post-grazing – and that’s key.           

“It just keeps that little energy battery pack at the bottom of the grass so as soon as it’s chewed off, it can capture the sunlight and bounce back.”

For the first half of the season supplementary feed is used as a tool for looking after the grass and ensuring peak production consistency longer through the spring.

If they followed a more conventional regime of using all grass through this period, Basi says, it would cost them more once supplements are re-introduced into the feeding system.

cows resting in a paddock
Their herd of 280 cows 24-hour graze the paddocks and Basi and Bunnik undertake a farm walk every 10 days to update their feed budget and monitor growth.

“On the flipside, it helps our reproduction side too. Empty cows are a huge cost to us, especially as sharemilkers as surplus cows are money, so we try to ensure they are well looked after and get in-calf, especially the heifers.”

Their 95% supplementary feed conversion rate is much higher than the industry average and Basi bases that on being frugal around the feedpad. Their grass utilisation calculation is 80% and last season, the cows ate 11.1kg dry matter per kilogram of milk solids.

To make it work, Basi and Bunnik must always be on top of their numbers because they feel they owe it to the Numans to make sure they are getting a viable return on their investment.

“I just don’t see how we can spend money in the system and not ensure we’re getting a return. It’s just wasting money because every dollar we spend of ours, we’re spending a dollar of the Numans.”

This year’s wet autumn saw them having to stand the cows on the feedpad for most of the day because such a high percentage of the paddocks were waterlogged. 

The cows were well fed on the feedpad, and this ensured when they went to the paddock at night, they rested rather than looked for food. It also reduced possible pasture damage.

The downside of this policy is that it resulted in higher lameness issues, with 26% of the herd requiring treatment. However, this is in line with the region’s average over the past 12 months with the wet weather causing major foot problems on many farms last season.

Despite its efficiencies, one potential challenge the farm system may face will be lowering its total methane emissions. 

The farm currently emits 14.8t eCO2/ha, well above the Waikato average of 8-8.5t eCO2/ha. However, the farm’s methane emissions per kilogram of milk solids is 7.3kg eCO2, well below the Waikato average.

John Numan chairs the National Federated Farmers Sharemilkers Owners’ section and has been actively involved in the group’s appeal of Plan Change 1, which has just completed a hearing in the Environment Court.

At the field day, he told farmers of the reaction he got from the judges and commissioners when he was questioned on his submission that despite being an efficient producer, the farm system could potentially get penalised because of its high N surplus of 118kg/ha.

He called this “a kick in the guts” due to the potential erosion-discouragement of substantially profitable systems returning better than the cost of funding. This could potentially reduce progression pathways and encouragement of farm purchases by successive generations.

When the judge asked him to elaborate, he said:

The feedpad is a key piece of infrastructure on the farm and it is used to feed out maize, palm kernel and GDDG when required.

“We believed we were good farmers, and we believe we have tried to promote longevity of staff, growing pathways for other people to get ahead in the industry and provide sharemilking opportunities.”

Changing their farm system would mean a reduction in farm operating profit. 

Last year, that return on capita was 7.2%, and 9.6% the year previous, well above the Waikato average of 0-5% across five years as measured by AgFirst’s annual financial survey of 25 Waikato and Bay of Plenty dairy farms.

It is also well above the Waikato average based on DairyBase data, which is 3%.

Numan has no issue using PKE as a feed supplement.

“We are using a waste product that historically was dumped. Instead, we are taking that and using it to create a food source.

“I’ll be disappointed if, environmentally, we are not allowed to keep doing what we are doing. If we need to change our system and drop our return on capital, we would have to question ourselves (and I hate to say this): Do we want to keep the land and keep farming if our ROC is not better than the cost of funding long term?”

He does not believe the farm system can be changed and retain profitability.

“That’s the kick in the guts for me because I hope that we can continue.” 

The alternative would be hiring a contract milker, which would be a blow to the sharemilking industry where it is increasingly challenging to find good jobs that offer genuine progression opportunities.

Basi backed Numan’s comments while remaining hopeful that new technology around feed additives that reduce methane levels could be a future option.

“If they drop our return, how are we supposed to afford land where Waikato is $55,000-$60,000 a hectare?”

Their whole system approach also helps with their mating performance. Mating goes on for 11 weeks with four weeks of AB using nominated Semex genetics on their cows. Bunnik does the insemination herself.

Following this they will be inseminating using beef bulls for 10 days and finally they will use short-gestation genetics for the rest of the period. 

Last season, the farm had a six-week in-calf rate of 74% and their empty rate was 8.6% without intervention and well below the Waikato average of 17%.

This season they installed Cow Manager on June 30 to help them fine-tune their system and assist with heat detection of the herd, with mating getting underway at the start of October.

They have still tail-painted the herd as they transition to Cow Manager so they can compare it to their heat detection and monitor the accuracy of the technology.

So far, Bunnik says, they have been super impressed with Cow Manager and the data it provides.

“We have had eight cows that we would not have picked on heat that it’s picked up. It’s a game changer.”

Calving gets underway around July 10.

Last year, The Numans’ farm had a return on capital of 7.2%, and 9.6% the year before that – significantly above the Waikato average based on DairyBase data, which is 3%.

Basi and Bunnik’s sharemilking contract with the Numans is slightly different to a standard 50:50 contract.

They pay 100% of grazing costs when the calves leave the farm on December 1. It is structured this way so there is a good return for the farm owners.

“We’re still making a 30% return on capital by doing that and we do that by utilising all of the efficiencies in the system,” Basi says.

The agreement also has the option for them to rear more heifers to grow their herd if they wish to move to a larger sharemilking job. This in turn helps grow their equity.

At a 7% interest rate over a 10-year period, if they re-invested their cash and stayed on the current farm, they would be well placed to purchase a small farm similar in size to the Numans’. They aim to shorten this time period by moving to a larger sharemilk position and fast-tracking their equity gain.

Numan says the emotion needs to be taken out when looking at contracts and it needs to be looked at from a business perspective. 

He shows the prospective sharemilker how their employment affects his business and the return on capital for both parties.

“We need to ensure that the owners are getting a better ROC and while this means that a herd-owning sharemilker might lose 3-4% return, they’re still getting a 30% return on capital for money they’re borrowing at 8%. It’s a no-brainer if you understand finances.

“I’ve encouraged outside-the-square thinking when speaking to National Feds and the national sharefarming sector for the wider-industry benefit of maintaining a viable use of progression pathways. Often owners comment that engaging a herd-owning sharemilker is not viable.”

Basi and Bunnik also treat the farm like it is theirs – an attitude that Numan supports because it means they take ownership of any maintenance issues rather than treating them as not their responsibility.

“The herd-owning sharemilker is getting a 30% return, and I don’t think its unreasonable to expect them to do a little capital work when they are getting a good ROC,” he says.

It’s that kind of attitude in sharemilkers that farm owners want. It improves their reputation and ensures ongoing employment from farmers and contributes to the ongoing viability of the sharemilking and contract-milking industry.

This article first appeared in the December edition of our sister publication, Dairy Farmer.

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