Dairy farms make the moo-la
Canterbury’s top dairy farmers had a five-fold increase in profitability with the best of seven farms used by Lincoln University Dairy Farm to benchmark its performance earning $7000 a hectare.
The university demonstration farm made just under $5000/ha during the 2016-17 season and most of the top seven, ranging from 140 hectares to 700ha from Culverden to Hinds, produced $5000-$5500/ha after operating costs were removed, but not interest or tax.
A higher Fonterra payout of $6.15 a kilogram of milksolids plus 40c/kg share dividends was the main contributor of the profit jump from the previous season.
The most profitable farm business has a higher stocking rate and brings in more feed than LUDF, but like the university farm, has achieved high profitability while scaling down its nitrogen losses.
The seven farm operations are in the top 2-5 per cent in Canterbury and typically dairy farms in the region are the most profitable nationally for grazing systems.
Some of the seven benchmarked farms had higher non-milk incomes over 2015-16 by astutely buying and selling stock.
LUDF was at the bottom of the benchmarking group with the top farm about 40 per cent more profitable per hectare. However, built into its business strategy are selfimposed nitrogen loss restraints to keep it in line with environmental regulations today and into the future.
South Island Dairying Development Centre executive director Ron Pellow said LUDF’s five-fold increase in profitability had a better look than the $1000/ha achieved during two previous seasons of low payouts.
‘‘We have been on this journey to maintain profitability while lowering our environmental footprint and have shown over the past three years that we can achieve this level of performance in three different climatic seasons.’’ He said its track record showed the farm strategy was not a ‘‘one-off’’ result.
Pellow said LUDF had maintained an operational profit over the last three years without taking on extra debt and in spite of its strategy to maximise profits and minimise nitrogen losses.
LUDF’s herd produced 516kg of milksolids a cow, down slightly on 522/kg in 2015/16, but up on 498/kg the season before.
Farm managers maintained a tight rein on operating expenses of just over $4/kg, including depreciation, but not interest or tax. Of the other seven operations the lowest operating expense was under $3.50/kg.
Most costs were similar to the previous season although feed costs were lower.
LUDF was unable to make as much silage as the previous season because of a cooler spring and summer and had to bring in more feed than it did previously.
The top performer is also proving that high profits can be achieved while plotting a lower environmental footprint. The unnamed farm is part of a forages for reducing nitrate leaching programme run by the dairy industry.
Nitrogen losses have been lowered by using imported feed more efficiently on a feed pad and by managing irrigation and stocking rates. Pellow said the work showed that the top performer’s nitrogen losses were not high despite it running a more intensive system than LUDF.
‘‘That shows that there are multiple ways of reducing nitrogen losses and they are achieving a high level of profitability for a reasonable level of nitrogen loss in a free draining soil compared with LUDF which is on a different strategy for reducing nitrogen losses.’’