Sheryl Haitana
Richard and Davina Syme complete a budget for the year and two reviews during the season to monitor how they are tracking.
“We update the forecast at least twice a year and compare it to our budget to see what our cash position is going to be like at the end of the season,” Richard says.
“It feels like we are in control, like we are looking out the front windscreen to see where we are going, rather than the rear-view mirror by just looking at our annual accounts.”
They are aware of the pressure coming on farmers from banks, so they are actively paying off debt while the milk price is high. They want to give themselves a two-three-year buffer so they have room to draw down when necessary. They send their biannual forecasts to their bank manager to keep them updated.
It’s always on their mind to keep a disciplined attitude around costs, regardless of the milk price. With a high payout, it’s easy to lose sight of doing the basics well. To be profitable, it’s key to know what your breakeven milk price is, he says.
“Our breakeven price is $5.50/kg MS. If you know what your breakeven price is then you understand the risk of your business.
“We are reasonably profitable, but our costs/kg MS is reasonably high. So we make sure they don’t creep up.”
It’s also important to monitor your budgets, check your invoices regularly and look out for cost creep in all areas of your business, he says.
“For example we saw our insurances had crept up quite a bit this year, so we are just working through those and will probably raise the excess on a few items to bring the costs back down.”
When Fonterra brought in their FEI index they swapped their ratio of palm kernel and maize and bought in more maize silage last autumn. That increased their costs last season, but they are still feeding that maize out this year. Their farm working expenses will be back to around $4.80/kg MS this season.
Profitability is an outcome of doing the basics well. While having some disciplines around financial management are important equally so are the other aspects of farm management, such as having a good team, managing pasture well and being proactive with animal health and maintenance.
If you don’t have a good team of people the farm won’t be performing to its potential, Richard says.
“It’s impossible to run a profitable and efficient business without good people. That’s true of any business.”
Their farm manager Blair Fine has been with them for three seasons. One if his KPIs is pasture management and due to his regular farm walks he was able to feed just grass for a few weeks during winter and spring this season when they would normally be feeding supplement.
“Blair was responding to what the feed wedge was telling him and he was able to respond quickly, we were able to maintain pasture quality and feed less supplement.”
Profitability is part financial management, and part farm performance, Richard says.
“Profit is an outcome of doing the basics well.”
Farm facts:
Owners: Richard and Davina Syme
Location: Te Aroha
Area: 63ha
Production: 100,000kg MS
Cows: 220
Farm System: Dairy NZ system 4, feeding maize and palm kernel
Dairybase 2018/19:
Return on asset: 3.6%
Operating profit/ha: $2296
Farm working expenses: $5.75/kg MS
Profit margin: 20%
Pasture and crop harvested: 14.9t DM/ha
