Farm treated as a business first

12 Sep, 2017 12:00 PM
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Michele and Brian Lawrence do a cash-flow budget based on what they think they are going to be doing and what happened the previous year.
If it's a $6 milk price, you can't suddenly change from Kiwi-cross cows to high production Friesians
Michele and Brian Lawrence do a cash-flow budget based on what they think they are going to be doing and what happened the previous year.

Meander, Tasmania, dairyfarmers Brian and Michele Lawrence use an Annual Operating Plan to help them manage their farm business.

Can you explain how your Annual Operating Plan works?

Initially, we have a planning session about the season and if there are going to be any substantial changes. So we look at things from a bigger perspective to start with.

If stocking rates or milking area or cow numbers are changing, then that's the starting point. In the last couple of years that has been relatively stable.

We budget if there's going to be any infrastructure or capital expenses.

We do a cash-flow budget based on what we think we are going to be doing and what happened the previous year. For example, if we spent $360,000 on grain, but we know grain prices have dropped by 10 per cent, then we might knock 5 per cent off our grain budget.

That's if we expect to feed the same, but we might decide to feed extra. That's the sort of process we go through. We don't go down to every tin tack, but the bigger stuff, we certainly look at. I'd say we have an excellent understanding of our business and where our money is going.

Does that understanding of your business help you make better decisions?

I'd definitely say it does. Michele is very good at doing the accounts each month, so we always know where we are at. All our accounts are up-to-date and Michele puts them in as they are received. We are able to track things very well.

We treat our farm as a business ù even though it is more than that, being where we live as well ù so decisions are made in a business-like manner. But in talking about all this, you have to consider the production system and how we have set up the business, because you can't just chop and change in a season.

If it's a $6 milk price, you can't suddenly change from Kiwi-cross style cows to high production Friesians and say, because the milk price is high, we will feed two tonnes of grain and produce 580 kilograms of milksolids a per cow.

It's worth making the point that we have set up our business to have a below-average cost of production, which may mean we don't fully capitalise on higher milk prices, but it means we can ride out the lower prices by keeping our cost of production at about $4/kg MS.

Do you have Key Performance Indicators that you try and meet?

By benchmarking, we get the feedback from that in the form of Key Performance Indicators, some are more important than others. I'm a hands-on manager, so I am aware very quickly if things aren't going as we would like in terms of the grass we are growing

We measure our pasture growth rates and we measure production and I see body condition of cows. I guess my point is that I am aware on the farm, even before you do any figures, whether things are going okay or not.

I think there are some key performance indicators that tell you pretty quickly if the business is going well or not. Like pasture production, harvest per cow and some of your costs of production.

Are you using DairyBase?

Michele does most of the data entry and she has been to couple of sessions on it with John Mulvany. We have organised our chart of accounts the same way DairyBase is set out. We're happy to work with it and think it's a good thing to do and to be able to compare. We all have strengths and weakness that we need to work on, so for us, it's a matter of measuring to make sure we are not missing things or falling behind.

What major changes to the business do you expect to implement in this financial year?

We made a significant change in the last financial year when we bought a neighbouring blue gum plantation, which is being turned into pasture. A bit will be part of the milking platform with the rest used for run off. So that's our big financial decision for the next couple of years.D

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