Anne Lee

Benchmarking data from high-performing farms in Canterbury shows it is possible to have farm working expenses in the $3.90/kg milksolids (MS) range and operating costs of just above $4/kg MS.

Eight top-performing farms have been part of a benchmarking study with the Lincoln University Dairy Farm (LUDF) and the data being collected through the study and wider DairyBase information is providing valuable pointers for others to make comparisons with.

  • From 2010 through to last season the group, including LUDF, has consistently kept operating costs in the $4- $4.50 range. (Figure 1.)
  • Operating costs include wages of management, depreciation and accounts for changes in livestock and feed inventory.
  • Last season farm working expenses ranged from $3.62 to $4.31/kg MS with operating profits ranging from $3096/ ha to $4848/ha. (Figure 2.)
  • Compared with Canterbury’s wider DairyBase group the LUDF benchmark group has performed at the top end when it comes to operating profit. (Figure 3)
  • The Canterbury DairyBase group shows a big variation each year in operating profit and every year since 2011 there are some farms that make little to no money.
  • The LUDF benchmark group operates at the lower end of operating cost compared with the wider DairyBase group. The LUDF benchmark range in operating costs is narrow compared with the Canterbury DairyBase group. Operating costs in the wider DairyBase group vary widely often from as low as about $3.20/kg MS to as high as more than $7/kg MS. (Figure 4)
  • The Canterbury data repeats the trends previously found. Both pasture eaten and operating costs have a strong relationship with operating profit. Farms with high pasture utilisation tend to have higher profits whereas those with higher costs tend to have lower profits.
  • But there’s no such relationship with bought-in feed. Those with high profits and high supplement use make sure they use pasture first and use it well. Supplements are sourced at a competitive price and the supplement that’s fed gives a high milk response. Farmers are skilled.

LUDF’s farm consultant Jeremy Savage from Macfarlane Rural Business warned farmers that, with mating over, now is the time to look towards next season and ruthlessly analyse the farm system if costs are north of $4.50/kg MS.

“If you want a low-cost structure farm system, it’s not about short-term decisions – contracting feed early or not – it’s about longer-term decisions.

“Have you got the right farm system fundamentally, do you have the right stocking rate? If you’re using bought-in feed all season long you need to go right back to basics.

“It’s not a once-over-lightly exercise. It can take some hard decisions and mean challenging your fundamental approach.

“The reason these benchmark farms haven’t moved on farm costs over the last three years is they really understand their farm system and they don’t react to high milk prices.

“There may be a few tweaks, but they don’t make big changes.”

If the farm had fundamental challenges farmers should look at all options to make it more resilient – milking intervals, culling early, lowering stocking rate.

They should look at benchmarks for their district, talk to other farmers, shoulder tap people who are doing well and get them to take a look at your operation and use rural professionals.