Independent Information For Progressive Farmers

10 Tips for Profit

A low payout does not mean poor profit. Gearing your business to thrive at a lower payout not just helps you through the tough years, but also makes you far more profitable in the good payout years.

So what are the top ten tips for driving for more profit?

1- Analyse your business

It’s not just about benchmarking, it’s about really understanding what makes your business tick. For many businesses the overheads, which include the debt servicing, account for between 65 and 75% of the businesses income at the current payout. Most businesses cannot cut much in the way of overheads and indeed, many need more infrastructure, so overheads would even increase.

This means generating more income to dilute these overhead down to below 50% of your income. This will come at a cost, and this means you have to know what your margins are. Look at the big picture of the business, if this doesn’t look good, go for some big solutions. Often you will have to look outside of convention for innovative ideas. This is good, as this moves the industry forward rather than 'same old..same old'!

2- Analyse your herd

For many farms a big proportion of the herd could be passengers which make little or no contribution to profitability.

These cows represent an asset value which is generating a very poor return on investment. A radical review of the herd could help you cut costs, redeploy capital and generate more income from less cows. Question whether cows are achieving a basic of 100% of their body weight in Milk Solids.

Better heifer rearing is certainly an area which needs attention as heifers are taking up to four lactations before achieving a mature yield.

3- Review last season’s production

If you look back at previous years’ milk charts: where have you lost production?

The average farm evaluated on Tracker could achieve 27% more milk based on the peak achieved. At a $5.00 payout this is worth over $150,000 of income. Changes in nutrition can cost effectively fill this gap.

4 - Investigate herd fertility and Days In Milk

The average herd achieves only 274 days of milking per cow. This means that around 30 days’ worth of milk are lost each season. Having a compact calving pattern will generate more days in milk and also reduce the number of days dry. This is a huge cost within the business. Long dry periods cost dear. Review the difference between feeding a dry cow per day and a milker.

5 - Look at your insurance policies

This does not mean ‘life cover’, this means if the season is not good, do you have sufficient feed stocks to see you through. If you have made good supplies of silage and have forward bought feeds on contract then your season is more secure.

Construct a feed plan each season and look at worst case scenarios.

6- Look at farm productivity

How much grass do you utilise per hectare? For many farms the level of utilisation is only 65% of what is grown. Much of this utilisation is lost through a lack of digestion.

Calculate your utilised dry matter per hectare using Dairy Club’s calculator on the website at http://dairyclub.co.nz/tools/.

Benchmark yourself on the Dairy Club Milk Map© below. If you are at the bottom of the range review forage digestion and utilisation.

7 – Feed Conversion Efficiency

All feed costs money, so it makes sense to ensure that as much of that dry matter goes into production as possible. Only achieving 80g/kgDM will earn 36c at a $4.50 payout. Achieving 120g/kgDM will earn 54c.

Calculate your FCE and benchmark it against the best, not the average. Aim for over 100gMS/kgDM.

8 – SCC – Counting the cost

Somatic cells cause damage in the udder reducing the number of milk secreting cells. For every 100,000 cells milk yield is reduced by around 1.8%.

The average farm on Tracker lost 2,500MS worth over $11,000. What does yours cost?

9 - Monitor

Keeping a close eye on production, costs and potential issues will help you to act quickly to resolve the problems. The most efficient farmers are quick to act. Having a plan is extremely useful as any deviation from the plan flags up an issue and there should be plans in place to get things back on track quickly.

10- Enjoy

Achieving goals, whether they be financial or physical, make the job enjoyable. This is the best industry in the world…enjoy it.

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