Budgeting for pasture profitability & resilience

Cost-conscious dairy farmers finalising their budgets can tackle the low payout on two fronts – reining in operating expenses while spending wisely to protect and maintain their profit base. This is especially important in the South Island, where poor pastures left as they are act as a financial handbrake. 


“We know budgets are tight on dairy farms this year. The answer lies in tackling the low payout on two fronts – reducing operating expenses while investing in the right things to dilute costs/kg milksolids and stay profitable,” says pasture systems specialist Graham Kerr, Agriseeds.


Graham says recent comments from leading dairy scientist John Roche reinforce the importance of strategic budget decisions for the year ahead, particularly in terms of pasture renewal, which is his area of expertise.   


“John pointed out that because of rising feed costs, the average New Zealand dairy farmer is milking 100 more cows than six years ago, yet making no more money. This in turn has eroded our competitive advantage and undermined farmers’ resilience.


“It doesn’t matter what system your farm is, it’s been shown time and again the amount of pasture eaten per ha is a key driver for profitability. Profitability leads to resilience, and resilience is the key to continued prosperity in the face of highly volatile world markets.”


Under-performing pastures left as they are act as a financial handbrake, he says.


“This is particularly so in the South Island where pasture renewal was well back in spring 2014/15, largely because of difficult seasonal conditions.


“So in the coming spring we are in ‘catch up’ mode with renewal. The danger we see is farmers not investing in the right amount of renewal for their business, then getting caught out with declining DM growth and facing an unpalatable choice – reduced MS/ha, or having to spend more on imported supplement to maintain production. Neither of which is as profitable.”


Spending $1000 for 3-4 t of PKE that is fed once then gone cannot financially compare with spending the same $1000 to renew a hectare of poor pasture.


“That pasture can be grazed again and again, typically providing 10-20 t DM over the coming years, which means extra feed for around 5-10c/kg DM - provided you do it right.”


That means budgeting for a good job, not a cheap job, and following some key steps (see table).


“The challenge I put out there to farmers while finalising budgets for 2015/16 is: how much more profitable would they be if they could renew an extra paddock or two to grow 20-30% more high ME pasture than they are now?”