For a former Rotorua couple farming on the West Coast the focus has been on producing a sustainable business that can survive low-payout years. Anne Hardie reports.
est Coast farmers Damien and Emma Groot are milking 100 fewer cows than when they moved to the Taramakau Settlement farm a decade ago, for more production and greater profit.
It is a formula that has worked well for the couple who were finalists in this year’s Dairy Business of the Year and won the Best People Leadership Award. Being named finalists was a considerable achievement when their milk payout that season was about $1/kg milksolids (MS) less than any other region.
Ten years ago the former Rotorua sharemilkers headed south with a 15% investment in the 306-hectare dairy farm as equity partners with Damien’s parents, Rens and Annette Groot. It sits in a line of dairy farms on river flats beside the Taramakau River, accessed by a no-exit road through West Coast bush that opens to the wide valley.
Heading down to the West Coast provided the “best bang for our buck” and even though that first year saw Westland Milk Products’ payout fall from $8.29/kg MS the previous year to $4.50/kg MS, they now have a 24% investment in the business, Clear Creek Dairy, which gives them a reasonable return on their investment of 4.9%. The couple also own 24% in a runoff bought by the business and separately they have bought a house at Lake Brunner which is rented out as holiday accommodation and adds to their growing investments.
On the dairy farm, their focus has been on producing a sustainable business that can survive those low-payout years by producing a more-efficient cow, which means fewer cows and lower costs.
Initially they milked 700 cows on 285 effective hectares, which has since increased to 290ha, before dropping to 600 cows which they reckon is about the right number for the property.
Milking 700 cows produced 339kg MS/cow and a total of 236,000kg MS whereas 600 cows produces between 400 and 410kg MS/cow to achieve between 240,000 and 252,000kg MS. At the same time farm working expenses (FWE) have dropped from $4/kg MS to about $3/kg MS. In line with that, operating expenses have dropped from close to $4000/ha to $3193/ha with the latter including $300-$400 that is allocated to farm improvement. In the past only about a third of that amount was spent on improvements.
“So the speed at which the farm is improving is accelerating,” Damien says. “There is still huge scope within the farm for improvement, a lot of which will happen just by farming it as the organic matter improves within the soils.”
The farm, Clear Creek Dairy, lies near the base of the Southern Alps and just across the river from the highway leading over Arthur’s Pass, so rainfall is high even by West Coast standards and can vary dramatically from 2.5 metres to an incredible 4.3m per annum. And even in a 4.3m year, you can still get a drought, they point out. Every year they’re prepared for the potential dry between January and March, but last year the drought came early in December. It’s unpredictable and when they’re not a wet farm, they’re a dryland farm, so fewer cows helps them cope with the vagaries of the seasons.
About 70% of the farm lies on stony river silts and the remainder rises up the glacier-created hillside. It’s those stones that enable them to farm the flats in high rainfall, as well as heating the soils early in spring to get grass growth.
“Everyone has a roller here,” Emma comments on the stones. “That’s your biggest investment.”
Most years grass makes up about 90% of the cows’ feed and hence they regrass up to 13% of the farm each year, including about 20ha that has had winter crop for the herd and wetter paddocks that weren’t suitable for winter crop. Despite the region’s rainfall they were working over paddocks at the beginning of September to sow with new grass.
To achieve more consistent growth across the farm, every paddock has been soil tested twice since they began milking cows on it and Damien says those tests explained why some paddocks were not producing as much.
Now they’re growing more grass – between 12 and 13 tonnes drymatter (DM)/ha – which means more grass down the cows’ throats by utilising 9.9t DM.
They probably could grow more grass, Damien says, but the land wouldn’t handle it without investment in infrastructure and he is reluctant to invest in concrete as it usually worked out cheaper to buy more land to increase production. Instead, their focus is on growing 13 tonnes of grass cheaper, rather than trying to grow more grass.
Some of the wetter paddocks actually grow less grass now and graze less stock because Damien and Emma decided it wasn’t sustainable to stock those paddocks higher.
“On some paddocks we are deliberately growing less grass,” Damien says. “We’ve gone for a lower-cost system on them, so we only do three dressings of nitrogen on them which is about 75 units for the year and that’s to deliberately grow less because they can’t handle the stocking rate. You just wreck them otherwise and then you have the cost of trying to fix them.
“I could chuck 250 units of nitrogen at them and have a really good profitable year and make money. But then next year I couldn’t farm that paddock the same, so it’s not repeatable. It’s got to be repeatable.”
Added to the cows’ grass intake is palm kernel, especially through spring to get magnesium into their systems and then a smaller amount through the season to encourage good cow flow into the dairy. It also adds more drymatter which can be a challenge in high rainfall periods even when there’s plenty of grass.
“I don’t think we make any money out of palm kernel, but it’s less stressful and I know the cows are getting magnesium which means they aren’t going to fall over.
“If we get a month where we’ve had 28 days of rain, the monitor farms have shown that the cows can’t get enough down their throat because there’s too much water content. It’s not common; it might be a two-week period in a year and it’s generally in the spring.”
Running a simple system with fewer cows means they have dropped costs so that during the 2016-17 season which was assessed for the competition, their production costs were $3.53/kg MS (farm working expenses $3.09).
To make the most of their grass system, they’ve focused on milking a more efficient cow. Today it’s a 50:50 crossbred herd where they’ve selected Jersey out of Friesian cows and Friesian out of Jersey cows. Jersey semen is used across all the first cyclers which gives those calves a head start before the Friesian calves come along. This year they are keeping their own Jersey bull calves to use as two-year-olds. Damien says he’s not keen on keeping them but it means they won’t have to buy and transport stock to the farm while Mycoplasma bovis is a threat.
The runoff is not far away in the Grey Valley which gives them 70ha to graze the young stock and is run as a low-cost block with only 50 units of nitrogen applied each year.
“We try not to make silage there and if we do, we feed it to the R1s there because I don’t think there’s any money in bringing it back here. It’s all about keeping it simple.”
Emma says the runoff has halved the costs for young stock which used to add up to $122,000 a year with graziers.
In the past they have brought some of the R2 in-calf heifers back to the milking platform in autumn to eat surplus grass rather than put it into silage, to keep costs down and keep their system simple.
The cows are always fully fed, so anything left in the paddock is usually grazed by the carry-over cows and if there’s more than they can eat, then it goes into silage. Topping is never an option – they’d rather put that grass into stock, whether it’s cows, carry-overs, heifers or silage.
It follows their strategy to have a low-cost system for the potential low payout years, Emma says; a lesson learnt from that first year on the farm.
“The paycheck pretty much just covered the mortgage that year because they (Westland) took money away. So now we have to have X money in the bank.”
That means they don’t run an overdraft and rely on a resilient system to get through the tough years. Animal health costs are about $55 per cow, with no cidrs, few metricures and only one pregnancy test. They carry out their own treatment of lame cows, dehorn their calves themselves which saves $7 a calf and only use antibiotics when absolutely necessary. When the payout was really low, they didn’t pregnancy test at all and judged it just by eye, which worked well enough.
If they have to buy in feed, they go for the cheapest on a megajoules basis, which means they have bought in silage in wet years that they haven’t been able to make it at home. In the past they have made their own pit silage, but have had more success in making 600 bales a year of balage to feed through winter.
“As we’ve upped crop (swedes) we’ve made less silage,” Damien says. “The crop is cheaper to grow than silage or balage – at 7-8c/kg DM and per megajoules it works out far better than silage which is about 12c/kg.”
That means the crop works out at 0.67c/MJ compared with silage at 1.2c/MJ, so Damien says it’s nearly half the cost in real feed terms.
“The crop is good for putting condition on because it’s such a high-energy feed. So we only make enough balage to feed on the crops; we don’t make any more.
“We cut back nitrogen if we have enough. We’d rather a natural surplus than a nitrogen-grown surplus. There’s no money in that in my eyes. If there’s a surplus, it has to come out of trying to feed the cows well rather than trying to grow grass through nitrogen. It’s less work because I don’t have to go around with the nitrogen spreader and I don’t have to make silage.”
Concentrating on feeding the cows well in a sustainable way means they are not chasing production and they typically achieve between 240,000kg MS and 252,000kg MS. In the 2016-17 season figures used for the DBOY competition, production worked out at 400kg MS/cow and 850kg MS/ha. That season their operating expenses were $3.86/kg MS and their operating profit was $1,436/ha – an operating profit margin of 30.4%.
“We don’t target production – it ends up what it ends up because if you target production you end up doing the wrong things. And I don’t want to force it.”
Their season begins at the beginning of August, with a springer mob taken out of the crop about July 25 and more springers continually pulled out of the crop until it is finished, normally about August 25 when there’s about 150 cows left to calve.
The heifers are kept out of the main herd and run with the skinny mob where they can still learn to compete, but with less pressure.
“We want them to learn how to eat 8kg in three to four hours and they’ve got to learn how to do that,” Damien says.
Calving spans 10 weeks, with just six weeks for the heifers which results in about 7% empty and fewer empties down the track, he says.
“If you have heifers calving week seven and nine, they end up empty the following year, so you might as well cull them earlier. If you have a heifer calving September 20, it’s going to have a very short stay on your farm. And I think it’s helped because we have a very condensed calving.”
In the 2016 calving season used for the competition, 94% of the herd had calved within six weeks without intervention. The herd usually ends up with about 8% empty, though this year it climbed to 14% which they attribute to the stress of the drought through mating. For the last four years they have been culling October calves because they’re unlikely to end up in calf the following year.
Coming up to mating, they don’t look for pre-mating heats because they’re “pretty confident” the cows are going to cycle and at mating they have one person dedicated to checking for cows on heat.
“We don’t paddock check. That’s just an opportunity for the cows to think they’re getting a feed and causing unnecessary animal movements which leads to making mud.”
Using the technology
One of Damien and Emma’s best management tools is Protrack Vantage in the 50-bail rotary dairy, using iPads or phones to record information or set up drafting options. Instead of paying about $14,000 for a couple of screens set up in the dairy, they spent $700 on an iPad with an app that allows them to access the computer remotely.
They prefer the iPads as they can move around the herd and tap numbers and information in as they go. When herd testing, they use a phone in one hand and the scanner in the other to put information into the system. As long as there is mobile data, they can set the system up to operate remotely from wherever they are.
“You’ve got technology – you might as well use it.”
Colostrum cows can go into the dairy at the same time as the milkers and be identified for milking and then drafted separately if required.
“Normally in the past you’d bring the milkers in and then you’d have to bring the colostrums in separately which involves an extra 20 minutes of work, whereas we just chuck them in with the milkers and plug them into draft. I can do that when I’m bringing the cows in and don’t have to make a special trip to the shed. It just means more efficiency.
“We always have the calvers on the same race as the milkers so you can capture that efficiency of bringing them in at the same time. If you had them on separate races, you’ve lost all that efficiency that can be achieved.
“That’s why we can go six on, two off (roster) effectively in the middle of calving because two of us go down at two o’clock, let the milkers go and then get the cows and calves out. The guy with the calves heads around the shed and puts the vat wash on and starts milking while I bring the milkers in.”
Usually, the two full-time staff work 12 days on and two off through calving and this year that lasted just three weeks before switching to six on and two off
due to efficiencies created through technology.
From calving, the herd is milked twice a day through the season until April when they drop to once a day to protect the cows’ condition as well as protect races which can suffer at that time of year. Cows are dried off according to their condition from May onwards, with the last continuing to about June 5.
“So we have a very short time-frame to get condition on them and have to feed them as much as we can,” Damien says. “Our goal in winter is feeding dry cows like milking cows all through June to about July 10 at 15-16kg DM/day. The hidden benefit of that is fully fed cows don’t tend to make a mess.
“We put a condition score on them through that time and as soon as they hit five we put them back to maintenance. There’s always about 150 at the start of June that are already five, so they’ll go into a crop mob and get fed maintenance and then we just add to it by having a draft every couple of weeks.”
Those cows still putting on condition get a diet of swede and grass, while those that have reached the condition score are solely on crop. As the crop is finishing they’re back into another season.
The Groots entered the DBOY competition after they were convinced by their neighbours at Pan Farm that it was a good business exercise to get the detailed report on their farm. It’s only one year of figures and they says it’s best used in conjunction with Dairy Base which they’ve used for four years.
One year by itself has too many variables, Emma points out, especially as payout dictates how much can be spent on infrastructure. When they farmed with a $3.80/kg MS payout, they saved as much as $400/ha on costs because they didn’t have the money to spend.
Payout differences between milk companies can affect profit dramatically as well which makes their success as finalists in the competition that much sweeter. For the 2016-17 season, Westland paid out $5.18 after retained earnings, while Fonterra paid out $6.52 including dividends.
Farm owner: Clear Creek Dairy
Equity partners: Damien and Emma Groot
Location: Taramakau Settlement, West Coast
Farm size: 290 effective hectares
Herd: 600 crossbred cows
Production 2016-17 on 282.3ha: 400kg MS/cow; 850kg MS/ha
Operating profit margin: 30.4%
Operating profit/ha: $1,436/ha
Cost of production: 3.53/kg MS
Operating expenses: 3.86/kg MS
Pasture harvest: 9.7t DM/ha
Pasture % of feed: 84.2%
Labour efficiency: 211 cows/FTE
Return on capital: 4.9%