Managing on-farm costs 

The 24th November drew a bunch of farmers interested in how they could manage on-farm costs.

The following handouts are available by clicking on the link to download a PDF file. For those of you who couldn't make it, more detailed notes are below.

pdf On farm costs - Chris Garland (0.78MB) 
pdf Rational fertiliser use - Ian McNab (1.35MB)
pdf EID. Cost or opportunity - Dave Treder (1.80MB) 
pdf Animal health costs - Trevor Cook (0.24MB) 
pdf B+LNZ summary - Tim Hembrow (1.41MB) 

2010 Figures - Tim Hembrow, B+LNZ


Lamb crop

The Western North Island region had its peak lambing date in the week of the 19th September, a week of stormy weather. Due to this, lambing was down by 9% in Taranaki, 8% Wanganui, 17% in the Rangitikey, 11% Horowhenua and a whopping 31% in the Manawatu. This averaged at 18% less than normal with intensive farms being hit more (25%) than hard hill farms (10%).  Our average lambing dropped from 123% to 108% this year, with the only region worse off Southland with a 20% reduction.

 The lamb crop in New Zealand is down by 2.8 MILLION lambs.

Farm expenditure

Over the last decade:

  • Less spending on fertiliser, R & M, lime and weed and past control
  • Shearing costs have increased, especially on Class 3 farms(North island hard hill country - Steep hill country or low fertility soils, carry 6-10SU/ha)
    • 60% increase in costs
    • Now 11% of farm costs
  • Vehicle expenses have risen by 40-90% due to increased fuel prices
  • Interest and rates have practically doubled

 Land values

There has been little change in the value of Class 3 farms but both Class 4 (some hill, some finishing) and Class 5 (intensive finishing) land values have doubled over the last ten years.

 Animal health - doing what you've always done can be costly - Trevor Cook, Totally Vets

 As with all costs, it is important to look at the cost relative to value. With animal health, early intervention is key. The cause of death is often just as clear after three deaths as after fifteen - identify and approach the problem early.

Drench is a significant portion of the animal health bill. A farmer finishing 5000 lambs will have productivity losses of $12500 if he uses at 95% effective drench rather than a 100% effective drench. A drench test costs $1000-$1500 and will identify which drenches work effectively on your property - a saving or a cost?  Further to this, grazing 5000 lambs in an integrated way will add $18750 and the cost of setting this up is a meagre $1000.

Animal health plans are important to set targets, identify type and when treatments are required and to set up a monitoring programme to review achievements. By establishing a plan, the products needed are known well in advance. This gives the opportunity to buy when there are sales and also gives you the opportunity to negotiate.

As a farmer you can reduce costs and/or get more value. To do this you must intervene early, invest in monitoring, create a plan with actions and product needs and seek advice - it is cost-effective.

On-farm costs - Chris Garland, Baker & Associates

It is worthwhile examining your farm data to allow benchmarking against yourself over time and benchmarking against others. By doing this you can identify strengths and weaknesses and examine what the top 10% are doing that you are not. "If you can't measure it, you can't improve it."

 Some hints from Chris included:

  • Contract permanent staff out
  • Feed stock well as they will be healthier
  • Buy lambs shorn and finish so they do not require shearing
  • Soil test regularly
  • Do not skimp on new grass and crops
  • Pit silage at 26c/kg DM is cheaper than baleage 34c/kg DM
  • Do as much of your own bookwork as possible to minimise accountant costs
  • Consider cell phone plans, skype, fixed toll call rates, phone/internet packages
  • Examine different interest costs e.g. floating vs fixed vs a mix
  • Do a budget, own that budget, refer to the budget, review the budget
  • Do stock reconciliations

On-Farm costs and the bank - Blair Shortall, Rabobank

 Interest rates are a major farm cost and can be 2-40% of GFI. This can be managed by considering the 90d bank bill (a rolling interest rate, re-fixed every 90d) and comparing to fixed, floating or combination interest rates. Look at the time frame required for loans and make the loan structure decision around this.

EID can increase your profit - Dave Treder, PGGWrightson

The message came through again, "If you can't measure it, you can't improve it." EID gives you this opportunity.

Most farmers already weigh but with EID, the technology enables you to capture the information electronically and set parameters for automatic drafting etc. The information allows informed decision making.

The technology begins with the electronic tag which is compulsory in all cattle by October 2011. All cattle leaving the property must have a tag, and all cattle must be tagged by 180d old. Beyond that, the equipment is voluntary but includes tag scanners or panel readers, platform or loadbars, XR3000 scale indicator and a cable or Bluetooth to interact with a computer. Autodrafters can also be incorporated into the system.

Deer will need compulsory EID tags by November 2011.

EID data allows data capture to:

  • Compare forages
  • Measure growth rates
  • Compare genetics
  • Examine efficiency
  • Identify with-holding periods
  • Accurate measuring and recording
  • Compare data with meat yields
  • Benchmarking

For example, a farmer weighed a mob of lambs on a crop. The three-way automatic drafter was set up so the group 40kg or more were drafted to go directly to the works; those growing less than 180g/d were taken off the crop as they were not adapting and the third group went back to the crop. The farmer needed only to push the sheep up the race.

‘It is not about making the top go forward, it's about dropping the bottom off.' Identification and separation of the tail with this technology allows this to be done with ease.

Rational fertiliser expenditure - Ian McNab, AgKnowledge

Clover can fix atmospheric nitrogen (N) and convert it to protein N for 2-3c/kg DM. The cost of applying N fertiliser is 10-12c/kg DM so it seems sensible to care for your clover and allow it to do its job to reduce your fertiliser bill.

 When discussing Olsen P levels it is best to get them to a level where they are not limiting production but to ensure they are also at an economic optimum. Adding too much P will not improve pasture growth and comes at a cost. The economical optimum can also be different for different classes of land, for example the optimum of Olsen P on the flats was 25-30 whereas it was 18-23 on hills on the discussed farm.

 There is considerable potential to increase profitability when considering nutrient deficiencies, the most important is phosphate, followed by potassium, then sulphur and molybdenum.

 Ian recommends:

  • Soil and clover tests on the farm with differentiation between soil type, land use and terrain
  • Aim for optimum P, K, S and lime levels to optimise clover growth and nitrogen fixation.
  • Use least-cost fertiliser
  • Monitor and adjust if necessary


And don't forget, the annual seminar is coming up on the 23rd of February. Keep your eyes peeled for further information...