Making money from milk

May 2019

Shifting the family farm down by two systems has been a business-saver for Waikato dairy farmer Alan Syme. Changing from an unprofitable System 5 to a sustainable System 2 to 3 is still a work in progress for Alan Syme. After a stint teaching in the Cook Islands, Alan returned to his family’s Tirau farm (‘Mataora Dairy’) during a drought in 2013. From the outside, everything looked rosy, he says. “The cows and the pasture looked great and my parents had low debt, but we were very unprofitable. The farm was highly stocked and we were importing a lot of feed. To use a phrase coined by John Roche (former DairyNZ senior scientist), we were making milk from money, not money from milk,” says Alan. “Once I’d studied the financials, it became apparent that what we were doing wasn’t sustainable and the low payout years made that crystal clear. If we hadn’t made changes, we wouldn’t have survived.”

Getting advice

Keen to create a simpler system, Alan set out on a mission to learn as much as possible in the 2013/14 season. To start with, he did a DairyNZ cashflow budgeting course, and joined DairyBase to help him benchmark his farm against others. “We all pay our levy, whether we use DairyNZ or not. There are heaps of resources: consulting officers, scientists and specialists, and there’s lots of information and advice available. It’s been really useful for me being able to tap into that expertise.” Alan went on to complete a Primary ITO Level 5 Diploma in Agribusiness Management. He also talked to many farmers and tried to operate a more efficient System 5. Expensive compound feeds were exchanged for bulk feeds (e.g. palm kernel extract and maize silage) on the basis that instead of paying $600/tonne, he’d pay $300/tonne and get twice as much. Alan says this worked – and it didn’t. “We made more milk but the substitution had a massive knock-on effect because we weren’t utilising our grass as as well as we could have. “In 2015, I added debt by buying part of the farm from my parents and leasing the rest. Then the payout crashed and I realised that, for us, this system wasn’t working – to some extent that was because of the debt levels. But let’s face it, at a payout in the three-dollar range, no system works, but especially the system that we were trying to run at that time.”

Making the change

Alan decided it was time to drop his system down. In the spring of 2015 he started to move from Friesian to the smaller and easier-care KiwiCross, to trying to breed a black Jersey-type cow that’s hardy, fertile, easy-care and profitable. In the 2015/16 season, he also started destocking from a peak of 820 cows, getting down to 680 at the start of the 2018/19 season. As a result, the farm’s production has dropped from 1700 to 1200 kilograms of milksolids per hectare per year (see graph to the right). “So there’s a lot less milk, but we’re making more money and have better margins.” He and his family have also adopted a pasture-first approach, followed by the next cheapest ‘other’. Maize and grass silage are made on-farm and they contract palm kernel extract. “We don’t always get that right either,” says Alan. “We go pasture- only as long as we can before considering the cheapest other.” Alan says he’s constantly tweaking the system, keeping on top of weeds, improving the pasture by regrassing, and upgrading the fencing. In the next five years, Alan will be focusing on debt reduction, further improvements and more leisure time. “Although the farm is now a System 2 to 3 and there’s been a massive improvement, it will always be a work in progress.”   This was originally published in Inside Dairy – May edition  

Media inquiries: Lee Cowan Senior Engagement & Communications Manager Phone 021 930 836 lee.cowan@dairynz.co.nz Vanessa Feaver Senior Communications & Media Specialist Phone 027 836 6295 vanessa.feaver@dairynz.co.nz Photo usage: If you require high-resolution versions of photos featured in this article, please contact info@dairynz.co.nz