BUSINESS BENCHMARKING
Measuring it,
to be sure Words by: Dianna Malcolm
N
umbers don’t lie, but which ones should dairy producers listen to? Benchmarking statistics have just been released by MilkMaP Consulting for the 2020-2021 season for clients throughout the country with the results encouraging farmers to look deeper into measures of profitability. Senior farm consultant Andrew Trounce says they have never dug so deep into the cost/benefits before, and his findings have thrown new light on some age-old debates. The business focuses on milk, management and profitability, Trounce says, by analysing the cost structure of the business – and the impact of any proposed feeding/stocking rate changes. COSTS CAN BE MISLEADING While the industry is heavily weighted towards keeping costs down, this season’s findings are telling him a different story,
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Trounce says, and it has a different ending. “We 100% agree that good cost control measures are important. But, it can be misleading to use farm working expenses on a per kilogram of milksolids (MS) as your only measure of profitability. “Because, at the end of the day you might have done a really good job keeping that number low, but it could be reflecting a missed opportunity. You must ask yourself, ‘Does this cost contribute to improved production?’ Also, ‘What other impacts could restricting it have on my overall result on everything from production to Body Condition Score (BCS) to reproduction?’” Trounce says the work is giving them a better understanding of their clients’ businesses, it is also giving their team validation for the company’s philosophy – that if cows are working close to (or at) their potential it will lift production per hectare. That, in turn, means more milk from fewer cows which creates a more efficient system because there will be less
MilkMaP’s senior farm consultant Andrew Trounce says New Zealand farmers are better positioned to deliver the best level of profitability for their farm by taking the time to understand the costs and key profit drivers (production/cow and therefore/ha).
per cow fixed costs. “If you own a farm your investment is in your land. Surely your measure of profitability should be against that hectare? So, how I look at it is, ‘What is your EBITD/ha (Earnings before Interest, Tax, and Depreciation)? If you have a big mortgage you need to know if you’re performing on that basis.”
Dairy Exporter | www.nzfarmlife.co.nz | December 2021
