In your November Mountain Milk Line
Articles
2010/2011- Has it been worth it? -Tallangatta Focus Farm
Clearing the Carbon Confusion
Balancing Carryover, Spillable Water and Business Risk
Consider the current economics of feeding grain
Monthly reminders
2012 AUSTRALIAN DAIRY CONFERENCE
The biggest event on the dairy industry calendar, the Australian Dairy Conference, will be held in Gippsland in February 2012. The conference,
which attracts more than 450 delegates, will be book-ended by tours:
For more information, please contact Esther Price 1800 177 636 or visit:
www.australiandairyconference.com.au
Coming Events
Clearing the Carbon Confusion Thursday, December 1, 201111.30am - 2.00pm
Kiewa Bowls Club Tangambalanga Lunch provided
Please RSVP to DPI Echuca by Friday November 25, call (03) 5482 1922.
Murray Dairy Business Forum
Thursday December 8, 2011
The 2011 Murray Dairy Business Forum will be held at the Moama Bowls Club which includes NCDEA Graduation and Gala Dinner.
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email dennis.watson@dpi.vic.gov.au
2010/2011-HAS IT BEEN WORTH IT? -TALLANGATTA FOCUS FARM
John Mulvany, ONFARM Consulting
In last month’s Mountain Milk Line the irrigation strategy of the north east Focus Farm business of Mark and Narelle McDonald was outlined. Now that the 2010/2011 financial year has finished we will look at how well the business performed.
This is a loaded question as there is no single measure that determines performance, however let’s review some physical and financial measures that might help to answer a few frequently asked questions, especially in relation to Mark and Narelle’s clearly stated objectives of having better cash flow, reducing debt, and, long term, having funds to invest off farm. The following tables present the financial details for the 2010/2011 year.
| Farm Details | Mark and Narelle own the herd and mobile plant, but rent all milking and turnout area. Titled area leased: 259ha Irrigated milking area: 112ha Dryland milking area: 72ha Turnout area leased: 154ha Milker number: 330 Stocking rate: 1.8 cows/ha Calving: March, September | ||||||
|---|---|---|---|---|---|---|---|
| Physical Performance | Question | Relevant Figures | |||||
| Production | |||||||
|
Pasture Consumption 7.9 tonne dry matter/ha (Pretty good for the North East) 4.4 Tonne dry matter/cow (includes fodder gained) Variable cost: $88/tonne dry matter |
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| How did the cows milk? | Production | ||||||
| BF kg | Protein kg | Solids kg | |||||
| Farm | 92,224 | 75,244 | 167,468 | ||||
| Per cow | 279 | 228 | 507 | ||||
| Per ha | 501 | 409 | 910 | ||||
| Was there much bought in feed? | Supplements Fed | ||||||
| 1.524 tonne concentrate | |||||||
| 0.26 tonne high quality hay | |||||||
| Equivalent to 21% imported energy (Not exposed to too much risk) | |||||||
| What was the situation with the grass grown? | Pasture Consumption | ||||||
| 7.9 tonne dry matter/ha (Pretty good for the North East) | |||||||
| 4.4 Tonne dry matter/cow (includes fodder gained) | |||||||
| Variable cost: $88/tonne dry matter | |||||||
| In summary, the cows milked reasonably well and a high level of pasture per cow and per hectare was consumed. | |||||||
| Financial Performance | Question | Relevant Figures | |||||
| Was the milk price ok? |
Income $1,014,719 at $5.78/kg MS (48% Domestic Incentive) $3,075/cow |
||||||
| How much was spent directly on producing milk? Are the Farm Working Expenses high? | Farm Working Expenses $ | ||||||
| Herd | Shed | Feed | OH | Labour | |||
| Farm | 84,104 | 35,043 | 423,149 | 43,626 | 47,173 | ||
| Per cow | 255 | 106 | 1282 | 132 | 143 | ||
| Total: $633,094 = $1,918/cow = $3.78/kg MS ($3.48 excl. paid labour) A bit high but may be related to cow numbers vs. potential numbers | |||||||
| What was left to pay debts, shares, tax, rental of milking area? |
Operating Surplus (Income less Farm Working Expenses) |
||||||
| Could all the bills be paid? (Cash flow?) | Budget Surplus (Income less all expenses): $74,912 Overdraft decreased from $100,000 to $25,000 so cash pressure easing |
||||||
| Will tax have to be paid? (Taxable profit?) | Income less Farm Working Expenses less Interest and Depreciation $145,081 Yes but manipulation occurring to keep low(Mark and Narelle’s accountant Ray Carty is on the Support Group) |
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| Was the effort worth it? How does this compare with investing in another business? (Business efficiency?) | Operating surplus $381,625, less depreciation of $46,050, less “allowance” for family labour of $140,760, plus fodder gain of $71,100 plus livestock gain of $124,043 equals EBIT (Earnings Before Interest and Tax) of $253,589 ($768/cow) or 22.6% ROA (Return on Assets). 17% ROA if fodder/livestock gains not included. Return on Equity 26% ... A good solid business! | ||||||
Overall 2010/2011 appears to have been successful for Mark and Narelle in terms of achieving their objectives, but now the support group is working on a range of actions to further assist Mark and Narelle. These include:
- Consideration of optimum cow numbers that should be milked; there are 410 to milk this year and more the following year.
- Evaluation of the feeding program to assist in maximising profit -not just production.
- A review of the cost of growing and consuming feed from irrigation this year.
- Ensuring that home grown feed is maximised at least cost.
- The support group has already started reviewing the 2011/2012 budget with Mark and Narelle. The following tables indicate the physical and financial aspects of the budget that are currently under discussion. A focus is on the inclusion of more paid labour to improve Mark and Narelle’s lifestyle.
Physical Targets 2011/2012
| Cow Numbers | 392 |
| Production | 540 kg milk solids/cow |
| Stocking Rate | 2.13 cows/ha |
| Concentrates | 1.77 tonne/cow @ $269/tonne |
| High quality hay | 0.26 tonne/cow @ $171/tonne |
| Pasture Consumption | 7.5 tonne dry matter/ha or 3.5 tonne/cow |
Financial Targets 2011/2012
(Based on $5.60/kg milk solids and 48% Domestic Incentive – a 3% decrease)
| Budget Surplus | $123,089 ($314/cow) |
| Gross Margin (Income less herd, shed and feed costs) | $600,544 ($1,532/cow) |
| Operating Surplus (Income less herd, shed, feed, paid labour | $452,812 ($1,155/cow) |
| costs, overheads) | |
| EBIT (true profit) – operating surplus less unpaid labour, | $289,565 ($739/cow) |
| depreciation and inventory changes | |
| Return on Asset (ROA%) | 23.3% |
| Farm Working Expenses | $3.68/ kg milk solids |
| $3.28/kg milk solids net of paid labour |
Achieving these objectives would be an excellent outcome in 2011/2012.
The broad issues and questions confronting Mark and Narelle are no different to any other dairy farm and the outcomes and decisions will be reported in the Mountain Milk Line in the following months. Complete budget details will be available at up coming field days.
For more information about the Focus Farm project please contact Troy Mauger on 0417 870 038, or email troym@murraydairy.com.au.
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CLEARING THE CARBON CONFUSION
Carbon has certainly been a hot topic lately with a lot of hype and ideas flying around. This information session aims to clear the air about carbon and what it means for farms and the agricultural industry.
This information session will help set the record straight about the current policy environment relating to carbon and how to best approach it from a farmers perspective.
Session details
| Date | Town | Venue | Time | Details |
|---|---|---|---|---|
| Thurs Dec 1 | Tangambalanga | Kiewa Bowls Club | 11.30am – 2pm | Lunch provided |
Speakers include:
David Griffin, Policy Manager, DPI Melbourne Neil Baker, Macalister Demonstration Farm Manager, Maffra irrigation region
- Questions answered during the session will include:
- What is the difference between the Carbon Farming Initiative and the carbon price policy?
- How will both of these policies affect your farm?
- What are some of the opportunities for farmers?
- What practical options can you consider now to reduce the impact of these policies and improve profitability into the future?
If you would like to hear the answers to these questions, please RSVP by Friday 25 November to DPI Echuca, telephone (03) 5482 1922.
Mountain Milk Line 5 November 2011
BALANCING CARRYOVER, SPILLABLE WATER AND BUSINESS RISK
Rob O’Connor, DPI Echuca
Irrigators on the Goulburn and Campaspe irrigation systems who carried over water from last season may have lost some ‘spillable water’ as a result of spills and pre-releases from Lake Eildon and Lake Eppalock. Farmers on these systems can check the balance of their spillable water account through WaterLINE online at www.g-mwater.com.au. The balance is reported in your Water Usage Statement and will show the volume deducted as a result of the spills or pre-releases. It also shows any volumes added as a result of the new season allocation and how much water you carried over from last season. Alternatively, these details can be sourced through your local Goulburn-Murray Water office or by talking to your G-MW planner.
Since the introduction of carryover in the drought year of 2006/07, many irrigators have used carryover as a means of managing the risk of potential future dry years. Their line of thinking largely being that the risk of losing some carryover water in wet years when a spill occurs is much less than the risk of having low amounts of irrigation water in dry years. At the time of writing this article, water lost in recent spills could be replaced by purchasing allocation at a historically and relatively cheap price of $30 per megalitre.
Providing that spills occur in wet seasons, and relatively cheap allocation (or temporary water) is available when this happens, carryover can provide relatively cheap insurance to assist with any future dry years. Additionally, by visiting WaterLINE online and finding out how much (if any) of your water has been deducted as a result of spills or pre-releases, earlier and more informed decisions and actions can be taken on whether you need to replace this water through purchases of allocation on the ‘temporary water market’. Of course the risk remains that if you carry over water in to the 2012/13 irrigation season, you may lose some or all of this volume if the lake spills next season.
This risk varies with individual circumstances.
This year water users have carried over large volumes of water from last season and taken advantage of new policy introduced in 2010/11 for the Murray, Goulburn and Campaspe regulated systems which lessened the risk of individuals losing their carryover water to only when the storage ‘spills’. Spillable water accounts now mean that irrigators can store water above their entitlement volume while there is free air space in the storages. This means any water that has been lost from spillable water accounts as a result of spills, has been displaced by this season’s inflow which basically forms another person’s seasonal irrigation allocation.
Factors that influence the amount of water irrigators can lose as a result of spills include how much was carried over from last season, the seasonal allocation, the size of the spill and the amount of low-reliability water share and high-reliability water share attached to the Allocation Bank Account.
Another consideration in managing your water is the volume of carryover recorded against your water shares (as shown in your Allocation Bank Account) on July 1 that is used to determine when additional allocation goes in to the spillable water account, even if you have subsequently used or traded the water you carried over. Any allocation you purchase in the current season is always available for use or trade, even if you have water credited to the spillable water account.
Irrigators on the Victorian Murray system have not lost any water they carried over from last season due to a declaration of a low risk of spill from Lake Dartmouth on July 1, 2011. Spillable water accounts have not been introduced on the Loddon, Broken and Bullarook irrigation systems. On these three systems irrigators can receive no further allocation when the sum of carryover plus this season’s allocation reaches 100 percent of entitlement volume.
In future years, the risk of losing water from your spillable water account will depend on the probability of the key storage spilling; Lake Eildon for the Goulburn system, Lake Eppalock for the Campaspe system and Lake Dartmouth for the Murray system. This may be a physical spill from Lake Dartmouth or an internal spill if Victoria’s half share is full, but only if this spill can’t be caught in Lake Hume. Issues that influence the probability of a spill occurring are the levels in storages at the start of the season and the outlook for future inflows. Just over two years of average inflows will fill Lake Eildon if no water is released, whereas it takes around five years of average inflow to fill Lake Dartmouth if there are no releases. Dartmouth provides reserve storage, so in some seasons there will be no need to make significant releases.
To develop a carryover strategy, talk to your trusted farm advisor or a DPI Dairy Extension Officer, at DPI Echuca (03) 5482 1922; DPI Tatura (03) 5833 5222 or DPI Cobram (03) 5871 0600.
Key messages:
- Goulburn, Campaspe and Murray system irrigators can visit ‘WaterLINE online’ to check the balance of their spillable water account.
- The volume that individuals lose as a result of lakes spilling depends on individual circumstances.
- Any allocation (temporary water) you purchase in the current season is available for use or trade.
- It is the volume of carryover recorded against your water shares on July 1 that is used to determine when additional allocation goes in to the spillable water account.
- Develop a carryover strategy to help manage the risk of potential dry years.
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Have you had your milk refrigeration system checked for this summer? If not, you could be throwing away money in excess power consumption.
Give Pinners refrigeration a call to book in a service on your refrigeration sytem, book the service with your neighbours as well and cut the travel rates in half!
We service all refrigeration systems and can check your home or tractor air conditioner also.
Call Shane Pinner to book in a service on: 0408 291 914 or the office 0260 407 121
CONSIDER THE CURRENT ECONOMICS OF FEEDING GRAIN
Denis Watson, DPI Rutherglen
As pastures start to dry off the quality starts to decline, which not only affects immediate milk production but can also affect persistency as the lactation continues. The quality of last year’s silage may also not be desired due to rain damage. This silage may not be suitable feed for milking cows, and should be fed to dry cows. Feeding grain/concentrates will increase the diet’s energy density but there are some things to consider.
Immediate milk responses to energy supplements (grain/concentrates) when fed to grazing cows can vary widely from farm to farm, from as much as 1.8 litres produced per extra kg of grain fed or as low as 0.4 litres. The size of the response depends on many factors unique to each farm, including the cows’ stage of lactation and body condition, the nutritional quality and quantity of the pasture and other forages on offer, the nutritional quality and quantity of the supplement fed, and stocking rate.
Table 1: the economics of feeding grain based on immediate responses for an example milk price of 32 cents a litre and grain price of $180/tonne (excluding freight)
| Response | Ratio kg gain : extra litre milk | $ return : $ spent | investment |
|---|---|---|---|
| Low | 1 : 0.4 | 0.7 | -ve |
| Break even | 1 : 0.6 | 1 | 0 |
| Average | 1 : 1 | 1.7 | +ve |
| High | 1 : 1.8 | 3.2 | +ve |
As shown in Table 1, at the example average milk price (32 cents/litre) and the example price of grain ($180/tonne) if the response is over 0.6 litres for each extra kg of grain feed then it is likely to be a good decision. (Note – these figures do not include the longer term $ returns that may also be gained from feeding more grain / concentrates through increased body condition).
It is difficult to accurately predict a response to grain because so many factors influence it. Increase your grain feeding rate by a small amount and your cows will soon tell you what response they will give you.
Don’t lose sight of the fact that what you are aiming to do as pasture quality declines is sustain the cows’ total feed intake, and therefore your feed conversion efficiency (i.e. litres milk produced per kg total feed dry matter). Grain is the preferred supplement in this situation as it is high in energy, low in NDF, and when fed in the bail, wastage is minimal.
Remember that achieving a well balanced diet requires a focus not only on energy and NDF, but also on protein and minerals and maintaining good rumen function. You may need to consider whether your cows would benefit from additional protein and mineral supplementation. Consult a nutrition adviser.
Monthly Reminders – November
Pastures
- As seed heads begin to emerge it is pasture quality that drives rotation length, not leaf appearance rate. Some annual ryegrasses will need a shorter rotation than perennial ryegrasses through November to maintain quality and optimise quantity.
- If more than 35 percent of a paddock has ryegrass seed heads emerged it should not be grazed. Cows will drop in production due to the lower quality pasture and will leave high residuals which will need to be topped. It is best to ‘skip’ ahead to a paddock with less seed heads and conserve the mature ryegrass.
- Once ryegrass plants enter the reproductive phase the residual will begin to rise (even after the plant has been grazed) the principles of residual height still apply however and this will need to be mechanically controlled down to a height of 4 -6cm.
- A fertiliser application through late spring on perennial ryegrass pastures will encourage tillering which will improve persistence over summer.
Summer crops
- Hopefully summer fodder crops such as brassicas and turnips are already in the ground however if not, it is not too late. Soil temperatures should now be above 16 degrees which means millet and sorghum can begin to be sown.
- Summer crops can be very expensive if they do not yield well. In most cases crops need to be direct grazed to be a cheaper source of feed than bought in cereal hay.
Feeding
- •Keep an eye on the cows and what is happening in the vat to tell you whether the herd is getting a balanced and adequate diet. As pasture quality drops you may need to increase the level of supplementary feeding to maintain a profitable production level.
- Identify ways that you can minimise wastage as it can be very costly. Concrete troughs, hay rings, rubber matting, running hot wires over the top of feed or simply feeding out along a fence line can all help reduce wastage.
Cows
- Most spring calvers will be past joining now and will have the bulls in. We all know the frustration of low incalf rates so make sure you have the necessary bull power! (one bull per 25 empty cows)
Irrigation
- Prepare irrigation equipment and channels. Allowing plants to be moisture stressed, even for a short period has dramatic consequences on pasture yields and water use efficiencies.
- Daily evaporation rates are starting to increase so it is important to keep on top of your irrigation. If you started your spray irrigation system late be aware you will have to apply extra water to fill the soil moisture deficit.
Young stock
- Don’t forget about your calves once they are weaned. With pastures loosing quality and increasing in fibre young stock will need to be supplemented to achieve target weights
