Runners up for the Dairy Business of the Year Supreme Award Richard and Nadine McCullough are always looking to improve their skill set and their bottom line. Sheryl Haitana reports.
When Richard and Nadine took over their farm at Karapiro on June 1, 2009, they inherited Interlact NZ farm consultant Chris Pyke.
Chris had worked with the previous farm owners, his knowledge of the operation was invaluable, so they kept him on as an adviser.
The couple had come from spring calving 330 cows to the split-calving operation milking 630 cows, feeding a more complex diet of supplement on a feed pad.
Simultaneously they took on a 190ha lease block next door as one of the sale and purchase conditions and had multiple classes of stock to manage on a large scale.
“It was a massive eye-opener and a big learning curve,” Richard says.
“The scale of this farm was big, and we had so many mobs of stock, autumn milkers, spring dry, some spring milkers, bulls on the property, autumn calves, spring calves, autumn heifers, spring heifers. Trying to keep a track of it from the management side of it was huge.”
Meanwhile the couple were learning the ins and outs of the new farm, they also did major upgrades to the farm dairy, races and effluent system.
“I think it took me a month until I had been in every paddock in the farm. The first couple of years were massive for us, working 80-plus-hour weeks, we didn’t have a life.
‘I’m pretty confident that we will meet any rules or regulation coming in. Part of the reason we do the Red Sky analysis and enter the awards is to make sure we are in the top quarter not at the bottom.’
“We kept Chris on because he had good records of the farm and he was instrumental in helping us make the adjustment.”
Surrounding themselves with key advisors is a testament to the couple’s continual focus on improving their business.
“We are constantly evolving and adjusting as we learn more about the system.”
Richard was sharemilking for his parents Bruce and Wyn when he met Nadine, who was teaching tourism at Wintec. The four bought the Karapiro farm in partnership in 2009. Richard and Nadine own the cows and the machinery and sharemilk for the business.
The previous farm owner was split calving, so they bought the farm’s winter herd and followed suit, continuing to supply Open Country Dairies as they couldn’t afford to buy Fonterra shares on top of the high land price.
“Properties this scale and this location don’t come up often in the Waikato, you pay a premium to live here,” Richard says.
The financial pressure of owning their own farm quickly escalated when two months later the Global Financial Crisis hit and the farm’s value dropped by about $2 million.
Buying in the peak and having to survive the quick drop has taught the couple how to budget and keep a close eye on their cost of production.
In 2015 the lease block came up for sale and they negotiated to buy half. At the same time they decided to go full winter milking and dropped the spring calving herd.
It made sense financially, but they’d also just had their daughter Ellah, so they wanted a better lifestyle, Richard says.
They complete a Red Sky Farm Performance Analysis for the farm business every year which provides a whole farm picture of their business and it has helped to improve their financial performance over the years, Richard says.
“It shows us what we are doing well, what our weaknesses are and our strengths.”
The McCullough Farm Partnership have entered the Dairy Business of the Year competition four times in the last 10 years and were finalists in 2015/16.
This year they were joint runners up for the national Supreme Award, won the Best Waikato farm performance award, the Environmental Impact award and were in the final three for the Business Resilience award.
It was a big win to do so well against mostly spring calving businesses, Richard says.
“The fact we made the finals with winter milking means we are doing a good job of our cost control.”
Their cost of production for 2017/18 season, which this year’s competition was based on, was $3.95/kg milksolids (MS), with operating expenses at $4.48/kg MS.
The business’ operating profit was $3708/ha and operating profit margin 44% last year – second out of all the finalists in the Dairy Business Awards.
Because the payout varies each year and can’t be budgeted on, their constant focus is on the cost of production and any rise in the milk price is a bonus.
They start calving 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 makes sure they maximise their use of pasture and home-grown maize silage first and foremost, and forward contracts all his supplement, so he knows the cost of his production ahead of time.
“One of the things I try and focus on is the margin between what we are getting paid and what we are producing it at. We like to produce our winter milk at the same price as most spring farmers, and then we get the winter milk premium which is where our profit comes from.”
One of Richard’s other tips for cost control is to focus on efficiency within the farm operation.
“When we bought the farm we wanted to have it running as efficiently as possible, we put automation in the shed and changed the layout of the farm.”
They built an extra race so access to the farm dairy was split 50% in each direction, so cows were not having to cross paths, and staff weren’t having to change gates or hold cows up during milking.
“We wanted to get the cow flow to be efficient.”
One of the other key investments the couple made was the automation in the farm dairy. They put in Protrack, milk meters, and later put in an LIC heat camera.
They have spent about $250,000 on the automation and the technology has been a game-changer, he says.
“The automation has paid for itself, without it I would need at least one other labour unit.
“We can have one person in the shed the whole year round, apart from helping with the colostrum cows. I don’t have to be in the shed during mating looking out for cows now.”
The Dairy Business of the Year competition is a way to push themselves and ensure they make positive gains every year, Richard says.
Their return on capital has improved since buying half the lease block. When they were leasing the 190ha runoff they only had a 4% return on capital, which didn’t look economic on paper, Richard says.
“When we made the finals in 2015/16 we had a 5% return on capital, but that was really hurt by the winter milk price. Open Country Dairies’ first payment for that season was just $4.
“That’s when we produced most of our milk. So we didn’t really end up getting any winter milk premium that season. Whereas in 2017/18 we had a good premium so it made our figures look a lot better.”
Their return on capital was 6.9% last year.
Winning the Environmental Impact Award was a good indicator they are doing a good job amongst the turbulence in the environmental space for the dairy industry.
“I’m pretty confident that we will meet any rules or regulation coming in. Part of the reason we do the Red Sky analysis and enter the awards is to make sure we are in the top quarter not at the bottom.”
The fishing industry went through similar disruption with quota changes and now it’s simply the dairy industry’s turn to adapt, Richard says.
“Some guys didn’t survive, but now the fishing industry is better off because of it, it’s more sustainable and stable and has a better reputation.
“Farming has just got to go through that. Most industries go through something like this.”
Richard and Nadine are focused on keeping a low environmental footprint – currently 25kg N/ha. They have fenced off the waterways and a lot of marginal land on the farm and recently planted another hectare of riparian strip.
They use 90kg N/ha, and have done a whole-farm soil test to be able to apply fertiliser more strategically where it is needed.
They’re also introducing dung beetles to the farm later this year. Dung beetles break down dung patches onfarm and have multiple environmental benefits, including improved soil health, pasture production, and reduce water and nutrient runoff.
The Karapiro farm is 200 metres above sea level at its highest point, and 140m at its lowest. It’s rolling to steep country with Tirau Ash soils.
About 40% of the farm is suitable for cropping and Richard uses his effluent block to grow his maize each year. He alternates the paddocks, putting each paddock in maize for two years, then back into perennial grass.
Growing chicory or plantain doesn’t work for their winter milking operation, and Richard doesn’t like growing brassica crops.
“Break feeding cows in muddy paddocks is not a good look these days.”
Ideally Richard and Nadine would like to build a covered loafing barn to house the cows so each herd would only be doing one walk to the paddock every day. That would help with lameness issues as well as further lowering their nutrient losses.
One of the biggest issues that comes with winter milking on challenging terrain is lameness. The longest walk to the farm dairy is 1.7km, with undulating hills and it can be onerous on the cows.
Richard and Nadine take a proactive approach, getting a hoof trimmer in regularly to stay ahead of any looming problems.
“You’ve got to look after the cows. We spend a lot of money on our races, and we use batt latches so the cows can come to the feed pad without any pressure on them.”
When it comes to the loafing barn, it is difficult to plan big capital investment or carry on with a lot riparian planting on some parts of the farm because it is earmarked for the Waikato Expressway extension.
They were close to negotiations with the former government, but plans have since been put on hold, hence the future of that land is on hold.
DBOY 2017/18 KEY PERFORMANCE INDICATORS
- Milk production: 377kg MS/cow, 1052kg MS/ha
- Return on capital: 9%
- Operating profit margin: 44%
- Operating profit: $3708/ha
- Cost of production: $3.95/kg MS
- Operating expenses: $4.48/kg MS
- Pasture harvested: 6t DM/ha
- Pasture % of feed: 69%
- Core cost per cow: $556
- Labour efficiency cows/FTE: 223
- Environment Score: 5/15
- HR Score: 4/15
FARM FACTS
- Owners: Richard and Nadine McCullough, Bruce and Wyn McCullough
- Location: Karapiro, Cambridge
- Area: 383ha, 240ha milking platform
- Cows: 630 Friesians
- 2018/2019 production: 279,000kg MS, 442kg MS/cow, 1162kg MS/ha
- Effluent irrigation: 80ha
- N leaching: 25kg N/ha
- 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 and automatic drafting, and heat detection camera.
