After completing the DBOY farm performance analyses and entering the competition five times, a Waikato farming family has achieved the Supreme Award. Elaine Fisher explains. Photos by Emma McCarthy.
From losing $2million in equity during the Global Financial Crisis (GFC) of 2009, Richard and Nadine McCullough have become the Supreme Award winners for the 2020 Dairy Business of the Year (DBOY).
“We bought this farm in partnership with my parents, Bruce and Wyn McCullough, in 2008. By 2009 the GFC had hit and the property dropped in value by $2million,” says Richard.
“Nadine and I were carrying a heavy debt and we’d lost equity but also benefited from the interest rates drop. Obviously, equity did not matter so long as you don’t have to sell the farm or borrow more money.”
However, it was tough in all ways – financially, emotionally and in sheer hard work – and it got harder again when the payout was really low for the 2014 to 2016 seasons. “It’s not easy getting up every morning knowing you are losing $1000 a day no matter how hard you work. We were fortunate that the property had a stand of pine trees we could harvest to help get us through.”
Richard says had they known how difficult those first few years would be they probably wouldn’t have bought the farm. “Now, though, there are no regrets.”
Turning the business around has been a long and carefully considered process, and among the tools that have helped their success has been completing the DBOY farm performance analysis every year and entering the DBOY awards five times.
Richard says the cost of the analysis is minor in the scheme of things and provides a whole-farm picture of their business, which has helped improve their financial performance over the years.
“It shows us what we are doing well, what our weaknesses and our strengths are.”
Last year the couple were joint runners-up in the awards, and that provided the impetus to enter one more time, targeting the supreme award.
“I don’t know if we can enter again and I’m not sure that we would, but we will continue to do the report because of its value to our business.
“The main reason for entering initially was not that we expected to be a finalist. It was all about self-improvement. The report is a good analysis of the facts and figures and a way to benchmark ourselves.
“The payout and weather can be so variable that it can make comparison from one season to the next difficult, but once you build enough data over a long enough period you can see trends and pick up areas of strength and weakness irrespective of weather and payout.”
McCullough Farm Partnership is a 245ha effective farm milking 650 cows at Karapiro in partnership with Richard’s parents, Bruce and Wyn McCullough.
The partnership also won the DBOY Best Waikato Farm Performance and Lowest Environmental Impact awards for the second year running.
The McCulloughs showed excellent return on assets at 6.2 percent, continuing a strong run in the most important single measure of business performance. They also achieved an excellent operating profit margin of 44%.
For every dollar of income generated they retained a high proportion as profit, which enhanced business resilience by providing a buffer for changes in performance.
They had good cost control as demonstrated by their low cost of production of $4.46/kg milk solids (MS). While their income per hectare is below average, tight control of costs have resulted in good profit per hectare.
Their high proportion of homegrown feed (12.3 tonnes of dry matter per hectare) allowed the partnership to control the amount and price of their supplements and added to overall farm resilience.
“It would be fair to say that I won’t trade efficiency for 100% perfection. Some farmers chase perfection but I won’t do that at the cost of efficiency.”
In the Lowest Environmental Impact category, the McCulloughs had the highest environmental score of 10 out of 15 for low nitrogen leaching (26kg N/ha/year), spreading effluent over 54% of the farm and significant effluent storage, feedpad use, and having 100% of waterways fenced and half of riparian areas planted.
While self-improvement was the main goal for entering, Richard says his competitive side did kick in when they were runners-up last year. “It helps to be competitive. To survive you need to have the drive to improve or else you will always be mediocre.
“From our experience of the GFC and then the low payout years, there is always pressure to be at the top of your game. Even though you are not competing directly with other farmers, you still need to be at the top when things turn bad, because it’s the low-hanging fruit that drop off first.
“It is really fascinating seeing all the different systems among finalists. Some are all grass, some extremely intensive. Some are spring milkers, some split and some winter milking. The interesting thing is that there is no one perfect system. It’s all about the management of the system that suits the farm and farmer, and how that can be run profitably.”
Benchmarking their business against others early on showed Richard and Nadine that their cow performance was at the lower end of the finalists.
“Obviously that was an area we could improve on, so we did a bit of work targeting transition feeding to get cows growing quicker. We also reduced cow numbers by 40.”
Richard’s thinking stemmed in part from his experience during an agricultural exchange programme to Denmark 17 years ago.
“Compared with overseas we don’t push our cows to their full genetic capability. Our cows do 450 to 500 kg/MS. Overseas they achieve up to 700 per cow. Admittedly that’s with barn-fed cows, but in terms of genetic potential there is plenty of room for improvement with our pasture systems in New Zealand.
“However, you have to make sure you don’t fall into a high-cost system. I’m always conscious of that risk and do a full analysis of the system and extra money spent on feed. It’s easy to get carried away when looking at the total production and forgetting the expenses.”
Refining transition feeding followed attending a seminar on dairy nutrition led by Bryan McKay of Dairy Production Systems Ltd.
“We targeted the colostrum cows, milking them once a day, and changed the diet for the springer mob so it is closer to what they will get as milkers to make the transition easier.
“We put a lot of feed in the paddock for the colostrum cows so they have easy access to it. Cows which have been through calving may not eat as much pasture as they need, so we fill a trailer with PK Extra 20, which is a pre-mixed blend of palm kernel and molasses. The molasses provides sugar energy for the cows and they can eat ad lib as much as they want.
“The result is that production for the springer mob and farm’s profitability. Calving begins on March 1 and the operation is a DairyNZ System 5 from February through to October, with the cows fed all grass during the other five months.
Richard maximises the use of pasture and home-grown maize silage first, and forward-contracts all his supplement so he knows the cost of his production ahead of time.
The 2020 summer drought ran into calving, putting pressure on the system. “Freshly calved cows need more protein, so we probably spent an extra $70,000 on feed.”
Building a covered loafing barn to house the cows, so each herd would be doing only one walk to the paddock every day, is now an aim. That would help with lameness issues as well as further lowering the farm’s nutrient losses. There’s another challenge ahead for the farm, and it’s coming not from the economy or the weather but from the planned Waikato expressway extension right through the property.
“We’ve said we want an underpass high enough for a combine harvester to drive under. I don’t think that’s too much to ask. It will be cheaper for the authority than buying almost half the farm,” says Richard, who thinks construction of the extension to the Waikato Expressway is probably years away.
“It would be nice to know for certain when it’s going to be built, but given the amount of traffic on the main road, and the crashes, I think it will happen eventually.”
5 TOP TIPS FOR FARMERS ENTERING THE DBOY
Richard McCullough’s five top tips for farmers entering the DBOY awards in 2021:
- Start now with good record keeping
- Separate out data for different aspects of your operation, especially inputs for cropping. To get the full benefit, record exactly what is spent where and keep track of that through the year
- Be prepared be completely open about your business
- Be prepared to have people question and challenge the way you do things. This is not done in a negative way – judges genuinely want help
- Take on board suggestions for improvements. Don’t be afraid to try something new.
FARM FACTS:
Owners: Richard and Nadine McCullough, Bruce and Wyn McCullough
Location: Karapiro, Cambridge
Area: 383ha, 245ha milking platform
Cows: 650 Friesians
Effluent irrigation: 80ha
N leaching: 26kgN/ha/year
Supplement grown onfarm: 38ha maize
Supplement bought in: 530t PKExtra 20 (palm kernel and molasses), 22t canola
Farm dairy: 44-bail rotary, ACRs, milk meters, Cellsense, Protrack, automatic teat sprayer, automatic drafting, and heat detection camera.
DBOY 2020
Key performance indicators
(Based on 2018/19 production season)
Milk production: 443kg MS/cow, 1140kg MS/ha
Return on capital: 6.2%
Operating profit margin: 44%
Operating profit: $3,843/ha
Cost of production: $4.46/kg MS
Operating expenses: $3.36/kg MS
Homegrown feed: 12.3
Pasture % of feed: 65%
Labour efficiency cows/FTE: 203
Environment Score: 10/15
HR Score: 10.3/15
