How much more money would I make?

Date: 2011-01-13 | Category: Dairy

Dairy farmers can make a lot more money. It’s not difficult to calculate.

Let’s make some conservative assumptions

Increased production from renewal of a poor paddock:	5 tonnes DM/ha/year [4–6 is typical]
Percentage of DM production eaten:	75%
Pasture to milk solids conversion factor:	15kg DM = 1kg MS
Milk payout:	$6/kg MS

So...

Per hectare, the cows eat

3,750 kg DM more pasture per year [75% of 5 t]

So they produce

	250 kg more MS per hectare
	[3,750 kg÷15] per year
	= $1,500 more per hectare
	[250kg x $6] per year

Total benefit

It is safe to say the improved production of new pasture over the old will be sustained for at least five years, and we’ve factored in a 10% annual decline in the extra production off the new pasture:

Total benefit
Benefit extra MS/ha year 1	$1,500/ha
Benefit year 2	$1,350/ha [$1,500 less 10%]
Benefit year 3	$1,215/ha [$1,350 less 10%]
Benefit year 4	$1,094/ha [$1,215 less 10%]
Benefit year 5	$985/ha [$1,094 less 10%]
Total benefit over 5 years	$6,144/ha

Less the cost of pasture renewal:

As well as the direct costs of sowing new pasture [drilling, seed etc] an allowance is made to buy in 2 t DM silage.
This compensates for lost growth while the new pasture is establishing and out of grazing for around nine weeks.

Add the costs (seed fert etc) [see Appendix 1]	= $932/ha
And purchase 2tDM @ 30c/kgDM	= $600/ha
Total cost	$1,532/ha

Less the cost of extra MS production:

Extra milksolids [MS] production has a cost.
However, additional milk costs less to produce than the total farm production costs, as a number of fixed costs have already been met [rates, insurance etc].

Cost of extra MS production
This has a huge range, very specific to each property. We have assumed the cost of extra MS production is 40% of additional income.
Cost of extra MS production	$2,458 [40% of $6,144/ha]

Net benefit

While pasture renewal itself is highly profitable, it must be remembered its major benefit is likely to be the gain in capital value of the farm from its extra MS production.

Extra MS production	$6,144
Less pasture renewal cost	$1,532
Less cost of extra MS production	$2,458
Net benefit	$2,154/ha

Appendix 1.

Pasture renewal cost assumptions

Direct Costs/ha		$ [ex GST]
Glyphosate	3 litres/ha	$54.00
Application cost		$40.00
Cultivation	1 pass	$150.00
Grass seed (treated)	20kg/ha	$180.00
Clover seed	4 kg/ha	$60.00
Fertiliser	150 kg/ha 15:10:10	$206.00
Roller drilling		$150.00
Selective herbicide	4 litres/ha	$52.00
Application cost		$40.00
Total cost		$932.00

Important Note

This appendix provide indicative conservative figures, which will vary between situations. Calculators are available online; please use these to calculate the specific costs for your own individual situation.

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