Knowing if you are making year on year improvement is easily shown by an increasing Economic farm surplus per hectare (EFS/ha)^[1].

This measure contains the revenue and underpinning costs of production. It standardises the wage paid to owner operators and removes any unusual arrangements such as rent paid to family. It therefore means that we can compare this figure with other farms for benchmarking.[1] EFS is the gross farm income (Sales less purchases) plus Other Income less Farm Working Expenses (including an allowance of a Standard management wage for the owner which in Farmax we use $40,000), less depreciation.

But what drives a high EFS farm? An understanding of this requires us to get a better look at what is under the hood. Two of the corner stone attributes to a farm system’s power-plant are pasture utilisation and cents revenue per kilogram of dry matter eaten (c/kgDM eaten); these are the bookends for success.  Our practice uses the Farmax system because it has the right framework for gaining this understanding so it makes it clear what we are seeing.  

We have considered programs that emphasise c/kgDM eaten but conclude they may not assess the right strategies for increasing EFS/ha.  This is simply because c/kgDM eaten tells us nothing about pasture utilisation and we need to recognise the importance of utilisation in achieving good pasture growth and higher pasture quality.

We’ve also come to appreciate that one of the strengths of Farmax is its modelling approach. Farmax enables us to develop a computerised model of a client’s farm then learn by doing. We can simply create alternative stock policies and see if they improve utilisation and let us grow more grass, and whether they are flexible to seasonal changes.

When we started working with Don & Jacqui McKay on their Marohemo farm in Northland they were already in the top 20% of farms for EFS. This makes it an exciting challenge for us because we are learning alongside the farmer new ways a system can be optimised - it’s a challenge because the solutions are no-longer simple.

The McKay’s base policy had a range of stock classes which included:

• 1250 breeding ewes;
• 450 ewe hoggets;
• 160 breeding cows (plus supporting replacements),
• 100 R1 finishing heifers:
• 335 R1 bulls and 80 R2 bulls.

The ‘normal’ pasture growth is good all winter with a drop in January to March. Finishing enterprises were well optimised; bulls were mostly marketed in December capturing higher schedule prices and surplus lambs were finished at high growth rates on specialist crops.

However, summers and autumns can be tropical causing kikuyu dominant pastures to become out of control later in the year. We recognise kikuyu is okay when young and leafy but with advanced stem and stolen growth it becomes sub-maintenance.

What we needed was an increase in ‘eating power’ to control these rogue Northland summer and autumn periods. Don maintained that the breeding cows did a great pasture control job and that their positive contribution was not accounted for in a normal gross margin. The Farmax model supported their value in pasture control.  But the cows were not as profitable as breeding ewes or bulls.

Table 1. Cents/kg GM eaten for each enterprise on the McKay’s farm

 
Farmax analysis confirmed that there was a serious issue maintaining autumn pasture quality which in turn meant that winter and spring pasture production was being compromised.

The heavy emphasis on bulls marketed in the November and December window and lambs on a crop meant pasture cover could ‘blow-out’ in autumn loosing both potential pasture growth and quality. An assessment based solely on c/kgDM eaten would simply take us down the track of increasing the finishing enterprises. In turn this would have decrease pasture utilisation and compounded the loss in pasture growth and quality.

Our Farmax analysis made us think hard about the stock classes Don could use in this summer and autumn period - How could we keep pastures under control and yet maintain a good return on investment?

The existing feed supply and demand is shown in Figure 1. As summer growth slows in January so does feed demand. However, in late spring as pasture growth comes away again demand increases. And of course within this demand is the very useful breeding cow tidying up pastures in late summer – overall an excellent fit between supply and demand and a major reason why the McKay’s are in the top 20%.

Figure 1. Supply and Demand of current option

Historically the finishing heifers had been wintered once and then sold during December and January on the local trade market at 200-220kg. Don had tried Once-Bred-Heifers back 15 years ago and flagged them. However, the analysis showed keeping them a second winter provided an ideal policy that:

• Helped prevent build-up of low quality feed
• Utilised the inevitable low quality autumn feed and,
• Made relatively high returns (12 c/kgDM eaten)

An alternative looked at replacing half of the bull enterprise and half of the breeding cow enterprise with Once bred heifers. Figure 2 showed this had a similar demand to the current system. It can shut down quicker in January yet build up faster in autumn/winter.

Figure 2. Comparison of the demand of the current farm and an alternative Once Bred heifer policy.

The extra cost of the second winter grazing was covered by the extra carcass weight; 270-290kg carcass weight versus 200-220kg carcass weight plus the heifer produced a calf which would have a value of at least $300. The downside was the possible risk of calving difficulty and the potential to lose the heifer and her calf. However, the policy is very flexible. At any time there is always the option of selling to the works or marketing as replacement stock. If a tropical summer is experienced then heifers can be held, re-mated and sold later as in-calf 2 year replacements. If dry conditions occur early in the season they can be weaned before Christmas and all sold to the works.

The beauty with Farmax’s modelling approach is having a model that can be used to fine-tune the detail like when to calve and when to wean. We also used it to set some basic decision rules to handle risk. Simply, given the pasture growth rate we can experience if we try to run an inappropriate selling pattern the model will run out of feed and become ‘infeasible’. It also showed the best sell-time zones for optimising price. This lead us to set some rules:

• Must be able to wean the heifers by Christmas;
• Must be able to market at least 50% of the heifers by Christmas;
• Ideally would be best to use easy finishing breeds.

 
Once-bred-heifers were not the only recommended change on the farm. Other parts of the farm policy were also able to be further optimised.

The bottom line was that an extra $42,000 per annum would be generated on the 450 hectare property. This represents an increase of some $93 per hectare off the back of a farm that was already in the top 20% of production and profit.

Where to from here?

The improved profit does not include any extra profit that can be made from ‘trading’ stock if and when feed surpluses are generated. Given the increase in feed quality the stock trading possibilities are exciting. Farmax provides the ability to track changes monthly using the software program called Farmtools. It requires some extra monitoring effort to record monthly pasture covers and some strategic stock weights. The reward from this extra effort comes as we see the surpluses and deficits looming ahead on the feed supply and demand graphs, often with a 3-5 month lead time – I like that and so do the farmers using Farmax!