Archive: Pasture to Profit Conference 2014

Published 12 December 14

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This year’s Pasture to Profit conference, organised by the Livestock Improvement Corporation (LIC), looked at ‘Making money from milk not milk from money’. Speakers from New Zealand and Britain looked at the potential for dairy farmers, given the world markets and environmental risk factors, cost cutting strategies and business development opportunities.

Our goal – high operating profit

Tight budgeting, strong cost control and realistic benchmarking helped Lincoln University Demonstration Farm (LUDF) to maintain a profitable business in the wake of the global financial meltdown.

“Our goal – high operating profit – hadn’t changed but the way we went it about it did. It wasn’t the kg of milk solids that’s important, it’s how they were obtained,” said LIC’s Jack Hooper. Together with improving reproductive performance and herd genetics, LUDF has been able to show an increase of milk solids from 398kg/cow in 2010, to 500kg/cow this year, while herd size has dropped from 670 cows to 560.

The farm is in the top 5% in New Zealand for profitability and started as a sheep conversion in 2001. Its 186ha are irrigated and run on a system 4 farm: utilising grass and grass silage only. Youngstock graze off the 160ha milking platform and most of the dairy herd is wintered off the platform.

Mr Hooper explained that LUDF used operating profit per hectare as the key measure of profitability. Pre-season, there was a focus on tight budgeting and during the season the business exercised cost control. “Post-season we used benchmarking to explore areas for improvement compared with other high-performance farms. A demo farm doesn’t want to be in second place,” he said.

“We don’t work to averages anymore and we are not interested in the best: we now precision farm. We have more detail, weekly farm walks, residuals. We body condition score all cows and it’s not how many are average score 5.0, it’s how many are below 5.0. We focus on the worst of anything, as that’s the opportunity for improvement.”

A spring rotation planner was used, together with appropriate stocking rates and grazing to leave the right residuals. This was to produce extra milk from efficiently-utilised pasture, thus diluting farm working expenses faster than any other factor, explained Mr Hooper. Strategic use of supplements helped prevent overgrazing and pugging and the same amount was fed every day for consistency. “We also replaced 10-15% of our paddocks each year, if needed, with new species for better growth potential,” he added.  

While the New Zealanders continue to focus on improving efficiency, they are keenly aware of their increasing environmental restrictions – and that they need to build more resilience into their management systems to cope with risk factors, said Mr Hooper. “Near Lincoln, we have nitrogen caps on the amount that can be leached into water; in Manawatu, there are phosphate restrictions. There is more dramatic change to come and the other big risks are milk price volatility and the weather. February is key rainfall month for how the season works out. September is also critical as it’s hard to manage liveweight and intakes when wet.”

DairyCo, together with the Royal Veterinary College, has developed an online quiz where you can test your knowledge of body condition scoring (BCS). The quiz can be accessed on the website and, for the best results, should be taken after watching the BCS video on the DairyCo YouTube channel. If you’re a Dairy Pro member and score over 80%, you earn one point. If you are not a member, why not sign-up at www.dairypro.co.uk  

What do you want your business to be?

A farm business owner’s duty as a leader is to inspire and direct others. A vision statement – an expression of what you want your business to be in the future – is a tool to use for that purpose, according to Sian Bushell, of Sian Bushell Associates.

“Business owners have it in their head what they want to do, but are not good at sharing it with staff. Sort out your values first, decide what you stand for and write a vision statement. Be patient, it can often take months to get the final statement you are happy with. Then decide how it will drive your business. It’s a future plan for success,” she said.

A vision statement should be the starting point of every farm business meeting and integrated into staff job descriptions, so that everyone buys into the vision, she added. “Let the statement help you grow your business and evaluate opportunities as they arise. Make effective decisions with the vision in mind. The most successful people do this £1,000/hour work. Make time to do this important stuff: a vision statement, good governance and evaluating staff performance.”

Formalise a plan

Growing a business from 300 cows on 86ha to 1,600 on three properties within 14 years required focus – and a plan, said dairy farmer and LIC chairman Murray King. Farming on the upper half of the South Island, the first step for Mr King and his wife Sarah was to formalise a plan, then work out both personal and business goals.

“If you don’t have a plan, someone else will have one for you! We set objectives and analysed the current situation. We then looked for the things that were most important to us and how we ‘do business’. This enabled us to clarify our most important goals,” he explained.

Key personal goals included having time for family and friends, learning and travel, while business goals were about generating free cash and growing the business. Mr King wanted to be able to employ staff and get out of the cowshed.

“The few really big things we had to get right to achieve our goals were the wise and determined use of limited capital and to generate significant free cash to re-invest wisely, while ensuring adequate spare time. Through the business-planning process, our mission statement evolved: ‘Growing for good’. We grow pasture, livestock, people and in doing so, grow our overall business.”

A DairyCo Planning for Profit workshop is a great way for dairy farmers to work through real financial and management scenarios for their businesses and test options for change.

The two-day residential workshop is aimed at those who have already started to consider making changes to their business, whether expansion, changing calving patterns, boosting milk from forage, planning for business succession or simply looking for more general ways to improve profitability.

In the New Year, workshops will be taking place on 28-29 January in Hampshire and in the North of England in March.

For more information or to book your place, call Rachael Chamberlayne on 024 7647 8788 or visit the website.

‘Easier care’ cows

Crossbreds have quickly earned a reputation as ‘easier care’ cows in New Zealand, as well as improving production efficiency. Consequently, the number of crossbred calves born as a result of insemination with an LIC sire has jumped from 40% in 1997 to 70% in 2013, revealed LIC’s Jack Hooper.

About half of crossbred cows in the population are sired by crossbred bulls, the rest are sired by Holstein Friesians or Jerseys to create a farm-specific crossbreed. “For many herds in NZ, especially South Island herds on system 3 farms [feed imported to extend lactation in autumn and for dry cows], the preferred cow is F10 to F12 in breed composition, which is maintained by using semen from both Holstein Friesian and KiwiCross bulls,” said Mr Hooper.

Five recognised production systems

New Zealand is no longer a country with one simple grazing system; there are now five recognised production systems, classified according to the use of imported feed. “The industry has changed over the last 20 years and shifted into the South Island with shorter growing seasons, so systems have changed,” explained LIC’s Jack Hooper.

In 2002, some 71% of NZ milk was produced in the North Island, by 2012, that figure had dropped to 58%. The five production systems group farms by their strategy for profitably matching feed supply and demand. “Firstly, the systems describe the basis of when imported feed is fed to dry or lactating cows during the season and, second, the amount of imported feed and/or off-farm grazing,” Mr Hooper added.

He went on to describe the systems as:

1     all grass and no cows graze off the milking area

2     dry cow feed is bought-in and there is some grazing off the milking platform

3     feed is imported to extend lactation in autumn (or spring in Westland) and for dry cows

4     feed is imported for use at both ends of lactation and for dry cows

5     feeding is all year round for both milking and dry cows.

“Systems 1 and 2 are around 250-270 days of lactation, with systems 4 or 5 extending to 300+ days. The majority of Kiwi farms are operating system 3, which involves bringing some feed in (either spring or autumn) to get a lactation of 270-280 days. The aim is to produce at the extremes of the season, as well as utilise grass efficiently.”

Milk recording is an investment

Milk recording is viewed as a cost to be ripped out of the business, because of its association with housed herds and pedigree cows. It isn’t seen as applicable to grazing systems, said NMR’s managing director Andy Warne.

“Yet 80% of Kiwis milk record, so this is an investment, not a cost,” he said. Using NMR data for Lincoln University’s demo farm, Mr Warne calculated that culling cows based on production worth would cover the recording cost of just over £4/cow for a 300-cow herd.

NMR’s NZ4 service, developed for grazing herds, includes six hours of labour for recording, with a minimum four flexible recordings in a lactation at a cost of £1,217. “How can you get that back? Cows are an individual business asset and breeding replacements allows you to cull by yield or production worth,” said Mr Warne.  

He said that replacing the bottom 3% cows on Lincoln farm with average production worth cows (each point being worth NZ$1) would repay the milk recording cost: “Recording allows a herd owner to design a cull policy that works off quantitative data,” he pointed out.

After that, it’s possible to use the additional services such as monitoring individual cell counts or Johne’s testing. He also warned about the importance of future-proofing the business against legislation. “Routine dry cow therapy is already banned in Holland, Germany and Scandinavia and this is coming to the UK. You will only be able to use antibiotics to treat known diseases, so you will need SCC records to justify their use.”

Potential profit

Improving reproductive performance on 1,200 cows was worth £53,400 to Rory Christie of Dourie Farming Company in SW Scotland. This was the potential lost profit he calculated when he took up LIC’s six-week in-calf challenge.

By cutting empty rates from 13% to 10.8%, increasing the six-week in-calf rate from 67% to 78% and achieving a conception rate of 58% – all without hormone intervention – Mr Christie set about recouping some of that profit. He benchmarked his results against NZ’s top herds. “Each 1% we were lower than the 78% achieved by the top 25% NZ herds [in six-week in-calf rate], worked out at £26,400 lost profit on our 1,200 cows. Our empty rate of 13% in 10 weeks, compared with 8.5% on top NZ farms, was costing us £27,000 across the herd.”

This potential lost profit could be gained by improving reproductive performance. “Our fertility spend went from just over £8,000 in 2013, to just under £7,000 in 2014. Our potential profit to gain now is from lowering our empty rate. With our increased herd numbers of 1,500 to calve next year, there is still £17,250 to be found,” he said.

Expanding from 600 cows to 1,200 cows had used a lot of CIDRs and hormones but in terms of fertility performance, some years were better than others. The key driver for Mr Christie’s business is the ability to get cows back in-calf in a 10-week period. “We had to work out where the gaps lay and how to fix them. We focused on three areas: youngstock, body condition scoring cows and dealing with non-cyclers,” he said.

Mr Christie aims for four strategy sessions each year: pre-calving, pre-mating, mid-lactation and late-lactation. All cows are condition scored and the previous period is reviewed. Feed is planned and action decided, with responsibilities delegated appropriately to keep the team focused.

Heifer replacements are now managed on a system set up as for the cows: they graze 2ha blocks in rotation behind a fence and grass is measured weekly. He weighs youngstock monthly, aiming for a target DLWG of 0.6kg: “This information is utilised and talked about, as opposed to not doing anything with it. It means we can take action much more quickly than before, if we are not reaching targets just before bulling and just before calving,” he said.

“We aim for 90% of mature weight at calving and a condition score of 5.5 (on the NZ scale) but you must weigh cows, as this sets all livestock weight targets, otherwise you are just guessing. Our cows are 470kg and body condition score 5.0 at calving.”

If you’ve missed it in the last issue of Forage for Knowledge, you can read the talk by independent soil and grassland consultant Chris Duller’s, ‘What actions make financial sense when it comes to grassland intervention?’ and Alicia Newport’s talk ‘Structuring your business to manage a volatile milk price’ on the DairyCo website.