Rachel and Kenneth Short haven't changed their farm budget since 2010.
Taranaki dairy farmers Rachel and Kenneth Short say despite a potential increase in forecast milk price, they won't be making any changes to their farm budget.
The couple are equity partners on a 440-cow, 168ha farm run under a very simple, low input system that operates year-in, year-out, with farm working expenses (FWE) of $1.90-$2.20/kg MS. Production for 2016/17 is expected to be 140,000kg.
We run a fully self-contained farm [no grazing off or bought-in feed] ... having been through the crunch period we've had, it's reaffirmed our belief that we're doing the right thing.
"We've run the same financial budget since 2010. We never make changes to the budget - even at a high payout, our farm working expenses are identical to what they are this year," Mrs Short said.
"This means when payout goes up or down, it affects our profit. The biggest impact at a low payout is in capital expenditure and debt reduction."
The couple had put a lot of energy into operating a low-cost pasture-based system that was sustainable at all milk prices.
"We run a fully self-contained farm [no grazing off or bought-in feed]. We have been challenged about our system in the past, but, having been through the crunch period we've had, it's reaffirmed our belief that we're doing the right thing," she added.
The increased milk price wasn't going to change Southland farm owner Tim Driscoll's operation either. His 560-cow, 190ha farm operated under a strong pasture focus, with minimal inputs of PKE and some fodder beet to fill feed deficits. FWE were $3.40/kg MS.
"We have a complete focus on the bottom line at the moment," Mr Driscoll said.
"When the payout dropped any costs and farm expenses were questioned, and last season we cut spending in some areas of feed, breeding and animal health. It hasn't had any effect; there's been very little impact without those inputs."
The reduced milk price had actually been good for driving some efficiencies to improve profit and repay debt.
"At least now we know we can operate in a low-cost environment," he added.
"Two years ago our long-term budget was based on a $6 payout. Now we're at $5/kg MS.
And if we use that same low-cost structure, we can generate some reasonable cash surpluses."
The pasture focus was paying off, and early spring production was up 20 per cent on last year.
Mr Driscoll said it was important to acknowledge the banks, which had been good to many farmers.
"Now we need to be good to them, and repay losses once we come into profit. We will be here in a low payout environment again, and we will be more prepared for it," he added.
The Short and Driscoll farms are two of 18 around the country that have opened up their books and shared their 2016/17 farm financials online via www.dairynz.co.nz/tactics (along with Dave and Heather Gray, at Awanui, and one other Northlander who does not wish to be identified).
DairyNZ extension general manager Andrew Reid said farmers who set their budget to perform at a low milk price would find volatility much easier to manage.
Scaling back a farm system to meet reduced income was much harder than maintaining a consistently low cost of production, but there were lessons to be learned from low milk prices.
"We encourage farmers to continue their focus on pasture, set a system that will survive in a low or high milk price, stay financially disciplined and focus on repaying debt," he said.
"We are going from a deficit situation to farmers potentially being able to return to break even and pay down some debt they might have accrued. It's a good time to maintain low costs and recover some ground."
Farmers were encouraged to prioritise catching up on essential repairs and maintenance, and capital fertiliser applications, with the major focus on repaying suppliers and paying down debt.
- To read the Short and Driscoll farm financials in more detail, and listen to audio sharing how other top operators spend their money, go to www.dairynz.co.nz/tactics; to see the top 10 attributes of farmers who have shared their budgets online go to www.dairynz.co.nz/top10.