Agribusiness: Online farm budgeting advice is close at hand

David McCall, GM research and development, Dairy NZ.

Some farmers need to get better at budgeting to weather the slow-down in dairying, says David McCall of DairyNZ.

"This doesn't mean writing a budget and putting it a drawer," he says. "It has to be a working document, a business plan. You have to monitor it and base buying decisions on it."

McCall is general manager of research and development at DairyNZ, an organisation that aims to improve the profitability, sustainability and competitiveness of the country's dairy farms. DairyNZ worked with some of the best dairy farmers in the country to learn what makes them successful.

"At the moment the average cost of producing a kilogram of milk powder is around $4.50; if we get that down to $3.50 farmers will get back to break even faster," says McCall. "The better ones manage to produce milk at up to $1 per kilogram less than the others. We wanted to learn how they did it, so we can share this information with the rest of the industry to help them get through tough times," he says.

DairyNZ recommends dairy farmers break spending into the following categories:

• Expenses absolutely necessary to keep the farm ticking over.

• Expenses or costs which can simply be deleted.

• Costs which can be deferred until things pick up -- this might include replacing machinery or building, although not replacing could mean spending more on repairs and maintenance.

• Costs which can be reduced -- such as buying an expensive food supplement that delivers a marginal increase in production.

McCall says farmers typically spend more when times are good. That's been the case in recent years, so most farms are in a good state to start with.

"It (food supplement) may be worth the cost when the price is high, but banking the cost saving and taking a reduction in milk production could lead to better profits when milk prices are low," he says.

There's a similar logic behind spending on fertiliser. All the advice on a DairyNZ website. It's something the organisation describes as "online mentoring".

"Farmers tend to be practical people," McCall says. "We're trying to be relevant and practical in our advice, so instead of describing what a benchmark is, we get straight to the point and tell them how to achieve the results needed to meet that benchmark."

McCall says it helps that the dairy industry has a co-operative culture.

"It's long been a strength with farmers happy to help each other and work together."