2014 dboy example report

8/11/2019 2014 DBOY Example Report

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Silver Sponsors Bronze Sponsors Supporting Sponsors

Dairy

Business

Analysis

FullFarmBusinessPerformanceReport

FinancialandPhysicalAnalysis

D

&

B

Farmer

XFarmLtd

IssuedJune2014

FortheYearEnded31/5/2013

Disclaimer:The analysis is based on information provided which has not been verified by DBOY. Its manager holds noresponsibility for any changes made on the basis of this analysis. Implementation of any recommendations should only beconsidered in consultation with your professional advisors.


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Monday 19 May 2014 15:19

D & B Farmer

X Farms Ltd

2012/13 X Farm vs Waikato Benchmark


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DEFINITION

1.HIGH RISK -

NEEDS

ATTENTION

2.MED-HIGH

RISK3.MEDIUM RISK

4. LOW - MEDIUM

RISK

5. LOW RISK -

EXCELLENT

PERFORMANCE

YOUR

FARM

SCORE

YOUR

FARM

RESULTS

PRODUCTIVITYMEASURES

Operating Profit/KgN Leached/ha n 3 $62

KgMS/KgN Leached/ha n 2 46

GHG g/kg MS n 4 9

Nitrogen Conversion Efficiency % n 3 33%

EFFICIENCYMEASURES

Kg Soluble N Applied/ha n 2 175

kg N Leached/ha n 4 24

kg P Runoff/ha n 4 1.1

Nitrogen applied as effluent n 1 151

Percentage of milking platform

receiving effluent n 2 19%

SOIL QUALITY &PROTECTION

Winter Cropping % of farm n 5 0%

60OVERALL SCORE %

ENVIRONMENTAL IMPACT ASSESSMENT : Dairy Business of the Year 2014D & B Farmer - X Farms Ltd

EFFLUENTMANAGEMENT


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T: 07 870 4901 F: 07 870 5408 PO Box 502, Te Awamutu 3840 www.no8hr.co.nz

HUMAN RESOURCES METRICS

Poor or Lower Quartile Median Quartile Upper Quartile Excellent or

Very Risky or High Risk or Average Risk or Low Risk Very Low Risk

Stability Index - Management Staff -

three year average1.00 0.95

Stability Index - Non Management

Staff - three year average1.00 0.54

NON WAGE STAFF COSTSCosts per FTE (milk co fines,

employment disputes costs etc)$0 $289 2.5

NON SCHEDULED DAYS LOSTDays Lost per FTE (beyond annual

leave entitlements)1.20 1.09 0.9

INVESTMENT IN FORMAL

TRAININGTraining spend per FTE in $$ and

Time96% 44% 2.4

LABOUR UTILISATION Cows per FTE 131 155.74 0.5

DIRECT WAGE COSTSManagement & Staff Wage Costs

per Cow$548 $425 0.2

7.9

Your Score

STAFF STABILITY 1.3

OVERALL SCORE

(out of 15)

X Farm Ltd - D & B Farmer

SECTIONS MEASURED BYYour Farm

Results

The Group

Average


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Intelact Ltd 0800 735 5881

EXECUTIVE SUMMARY

Overall your business is generating a comfortable return however there is a level of risk withhigh cost of production plus financing costs. High per cow milk production and low core costsare key features to your returns. To further fine tune your business look into reviewing some

high costs to reduce your cost of production as well as reviewing financing. Supplementinputs have increased from previous years as a result of the drought and milk production hastaken a drop which will be resulting in your higher cost of production. Consider ways of

being more drought resilient either by reviewing your stocking rate to ensure pasture per cowis maximised, or look into using summer tolerant crops to manage feed intake over the low

pasture growth periods.The environmental impact on your farm is moderate, with reasonable N and P loss there isroom to review the impact, consider better utilising nutrients from your effluent.Human recourses in the businesses are well managed; small adjustments may help to improve.

SUMMARY OF RESULTS

PROFITABILITY MEASURESYour Farm Waikato

AverageWaikatoTop 10%

Return on Capital 3.3 % 3.0 % 5.2 %

Operating Profit per Hectare $ 1,484 $ 1,526 $ 3,181

Return on Equity 0.6 % -0.8 % 2.7 %

Pasture Harvested (tDM/ha) 10.7 11.5 13.7

Milk Price ($/kgMS) $ 5.84 $ 5.85 $ 5.85

RISK MEASURESPasture as % of Diet Consumed 65.1 % 73.7 % 72.0 %

Operating Profit Margin 19.0 % 19.2 % 31.9 %

Cost of Production per kg Milksolids $ 4.92 $ 4.84 $ 4.01SOLVENCY MEASUREEquity % 62.0 % 64.3 % 65.8 %

EFFICIENCY MEASURESMilk Production per Hectare (kgsMS/ha) 1,157 1,196 1,510

Milk Production per Cow (kgsMS/ha) 392 360 405

Average Cost of Consumed Feed $/tDM) $ 326 $ 358 $ 321

Forage Cost ($/tDM) $ 350 $ 433 $ 397

Concentrate Cost ($/tDM) $ 385 $ 435 $ 404

Cows per Full Time Staff Equivalent 131 147 176

Management & Staff Costs per Cow $ 548 $ 422 $ 361

Core per Cow Cost $ 577 $ 617 $ 559Core per Hectare Cost/tDM Pasture Harvest $ 89 $ 101 $ 87

RESILENCE MEASURESOperating Profit / Kg N Leached/ha $ 62 - -

KgMS/KgN Leached /ha 46 - -

N Leached Per Hectare 24 - -

P Runoff Per Hectare 1.1 - -

N Applied as Effluent 151 - -

% of Milking Platform Receiving Effluent 19 % - -DEFINITIONS of KEY PERFORMANCE INDICATORS can be viewed at

DEFINITIONS of TERMS used in RED SKY can be viewed at

www.redskyagri.com/file/pdf/RedSkyKPIsDairy.pdf

www.redskyagri.com/file/pdf/RedSkyDefinitions.pdf


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KPIS PROFITABILITY

KPI

YOUR

FARM

WAIKATO

AVERAGE

WAIKATO TOP

10%

Return on Capital3.3 % 3.0 % 5.2 %

Operating Profit/ha $ 1,484 $ 1,526 $ 3,181

Return on Equity 0.6 % -0.8 % 2.7 %

Pasture Harvest (tDM/ha) 10.7 11.5 13.7

The most important measure of profitability is Return on Capital. This is calculated bydividing your Operating Profit by the total value of all assets under your control (both ownedand leased). The lease costs associated with any leased assets are included in the OperatingProfit calculation.

Return on Capital

Your Return on Capital of 3.3% reasonable compared to the Waikato Average. The mainreason for this is your reasonable Operating Profit.

Operating Profit

Your Operating Profit per Hectare of $1,484 is similar the Waikato Average. This is aresult of high income, with slightly higher than average costs. Attention should be focused onmaintaining high income while keeping costs under control. Ensuring every dollar spentgenerates a return.

However this is not as sound a measure of profitability as Return on Capital, as OperatingProfit per Hectare is highly influenced by the quality of the land being farmed.

Return on Equity

Return on Equity is the most important indicator of net wealth growth but it cannot be usedfor comparison with other farmers as it includes debt servicing, and is therefore influenced byeach individuals level of debt.

Your Return on Equity(excluding capital gain) is 0.6% which is less than your ROC. Thismeansyour cost of borrowing is greater than the return you are generating, but still positiveso you are still growing equity.

In general your Return on Equity can be improved by: Increasing operating profit; and/or Decreasing finance costs (i.e. borrowing at a lower rate).

Pasture Harvest

Your Pasture Harvest of 10.7 tDM/ha is slightly lower than the Waikato Average. This isinfluenced by your nutrient management, land quality; pasture management, stocking rate,nitrogen fertiliser use, effluent use and supplement use. An increase in pasture harvest has theeffect of reducing the cost of pasture and hence the overall cost of production, so you shouldaim to increase your pasture harvest.

Key concepts of 2012 Dairy Business of the Year finalists were:

Use the three leaf grazing principle to manage rotations.

Regular monitoring of pasture cover.

Graze to consistent residuals (5 cm pasture height, 1500kgDM/ha).


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KPIS SOLVENCY &RISK

KPI

YOUR

FARM

WAIKATO

AVERAGE

WAIKATO TOP

10%

Equity 62.0 % 64.3 % 65.8 %Pasture as % Feed Consumed 65.1 % 73.7 % 72.0 %

Operating Profit Margin 19.0 % 19.2 % 31.9 %

Cost of Production per kg MS $ 4.92 $ 4.84 $ 4.01

Equity

Your Equityof 62.0% is sound, providing some buffer for fluctuations in solvency, includingland price, interest rates and performance.

Pasture as % of Feed Consumed

Pasture as % of feed consumed is 65.1% so your system is considered moderate-highsupplement. Higher levels of supplement feeding increase financial risk by generally havinglower margins and higher cost of production but can offer higher returns especially at highmilk prices. Farms with a higher pasture % of diet tend to have lower costs of production, andlower cost of production is strongly correlated with profitability.

Operating Profit Margin

The Operating Profit Margin represents the percentage of gross revenue retained as profit (forinterest payments, principal repayments, tax and true profit). T he higher the figure, themore secure the system. T arget levels are related to the farm system being operated, withhigh feed-input systems targeting lower operating profit margins than low feed-input systems.

Your Operating Profit Margin is 19.0% which is an average result for a moderate-highfeed-input operation. This represents an average, system with adequate margin for debtservicing and tax payments.

Cost of Production

Cost of Production (COP) represents the net cost of producing one litre/kilogram of milk. Ifgearing is high (e.g. high levels of debt) then there should be a significant gap between Costof Production and the milk payout to ensure there are sufficient funds for debt servicing andtax payments. Cost of Production can also be compared across years for your enterprise andagainst other farmers at varying milk prices as it is not influenced by milk revenue.

YourCost of Productionof $4.92/kgMS is reasonable, leaving a moderate margin for debtservicing and to buffer reductions in milk price.

Your Cost of Production plus financing costs is $6.03/kgMS. This is effectively theMilksolids price you require to breakeven and reflects your debt servicing costs. Managingdebt is also a highly important cost to control, ensuring there is a healthy margin kept betweenthis expense and the milk price will influence profit which can be retained.

Risk Summary

In general your risk/solvency measures are indicating a moderate-high level of risk, and abusiness that is in a position to be affected by unfavourable conditions/events.


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KPIS EFFICIENCY

KPI

YOUR

FARM

WAIKATO

AVERAGE

WAIKATO

TOP 10%

Milk Production per Hectare (kgsMS/ha) 1,157 1,196 1,510

Milk Production per Cow (kgsMS/ha) 392 360 405Average Cost of Consumed Feed/tDM $ 326 $ 358 $ 321

Forage Cost/tDM $ 350 $ 433 $ 397

Concentrate Cost/tDM $ 385 $ 435 $ 404

Cows/Full Time staff Equivalent 131 147 176

Core per Cow Costs $ 577 $ 617 $ 559

Core per Ha Costs per tDM Pasture Harvest $ 89 $ 101 $ 87

Your Milk Production per hectareof 1,157 kgMS is 9.7% below the Waikato Average. Thefactors contributing to this are:

Milk Production

Milk Production per Cow:

Based on Milksolids per Cow; your per cow production of 392 kgMS is higher thanthe Waikato Average.

Based on Milksolids as a Percentage of Cow Liveweight; yours at 78.3 % is midwaybetween the Average and/Top 10%.

Stocking Rate:

Based on Liveweight of Cows per Hectare; your farm is carrying 1,476 kg/ha, this isless than the Average of 1,596 kg/ha.

Feed consumed:

Your pasture consumed per cow (estimated tDM) of 3.22 tDM is lower than theAverage of 3.33tDM.

Your total feed consumed per cow (estimated tDM) of 5.01 tDM is higher than theTop 10% of 4.94 tDM.

You should consider monitoring your environmental impact to ensure your asset is protected.As well as considering regional policy that may put pressure on stocking rates and how theyare managed. Setting the stocking rate is an important strategic decision. The optimal stockingrate should be based on the historical pasture harvest for your farm and the resources youhave available but focus should also be given to maximising pasture consumed per cow.

Cost of Consumed FeedThe Average Cost of Feed Consumedis a weighted average of the cost of pasture, forageand concentrates. In almost any system, feed costs are one of the two highest costs, alongwith labour (imputed & paid). It is one area that has significant potential for improvement in

profitability due to the scale of the expense.

The cost of feed has three components:

Direct (or purchase) costs.

Variable costs a proportion of some farm working expenses that should be attributed tothe particular feed type e.g. labour, repairs & maintenance, and vehicle expenses.

Capital costs costs attributed to owning capital items required for feeding e.g. the land

for growing pasture, feed pads for forage, silage wagons, in-shed feeding systems, etc.


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Your Average Cost of Feed Consumed, of $326/tDM, is comparable to the Top 10%. Themain driver is the cost of pasture, particularly the capital cost but this can be diluted andreduced by a high pasture harvest.

Your Cost of Pasture of $305/tDM is comparable with the Top 10%. T his is being

significantly influenced by your average pasture harvest, high land value and overall level ofcapital investment and your average Direct Pasture Costs (which includes pasturemaintenance & renovation, greenfeed crops, fertiliser, and hay & silage conservation on thedairy unit).

Your Cost of Forageof $350/tDM is very low compared to the Top 10%. This is due to theproportion of homegrown vs bought in feeds, where having a higher amount of homegrownfeed whether on the home block or run off reduces the average cost of forage. As well as youraverage variable expenses and capital expenses. The proportion of your total forage producedon land you own or lease (excluding pasture silage and hay produced on the milking area) is100%. T his is significantly higher to than the benchmarks. Your high level of forage use(19.7% of the diet) makes the cost of forage of significant relevance in your system.

Your Cost of Concentratesof $385/tDM is very low compared to the Top 10%. This is lowdue to your low average purchase price. Your high level of concentrate use (15.2% of thediet) makes the cost of concentrate of significant relevance in your system.

Labour Efficiency

Labour efficiency is an area that holds significant potential for improvements in profitabilityas it is a highly elastic cost, and one of the largest expenses on the farm. These ratios includean allowance for the owners time as well as an allowance for other people who arecompleting work but not drawing a monthly wage. As a result improvements in these ratioscan lead to either cost savings or more time being available to pursue other interests.

Your Labour Efficiency of 131 cows milked per full time staff equivalent (Cows/FTE) iscomparatively low compared to the Waikato Average and Top 10%. This is an area for furtherimprovement where possible.

Your Management & Staff Cost per Cow(including imputed or unpaid labour) of $548 iscomparatively high compared to the Waikato Average and Top 10%. This is a potential areafor further profitability gains.

Core Costs

Pasture-based dairying has a high proportion of variable costs. In businesses such as thisthere are not significant opportunities to increase revenue (i.e. milk production) to waterdown the impact of high costs. E ffectively businesses with a high proportion of variablecosts have no a lternative but to control these variable costs if they are to improve

profitability.

Your Core per Cow Costof $577 is good compared to the Waikato Average. This is a resultof your good cost control in some areas, particularly grazing, electricity, freight, otherexpenses, R&M and depreciation. Yet high costs in vehicles, animal health, breeding, dairyshed and standing charges. This is a strong feature of your operation, and a good base fromwhich to increase production and profitability return for the expenses.


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Your Core Cost/ha/tDM Pasture Harvestof $89 is good compared to the Top 10%. This iscorrelated to profitability and is influenced by your good cost control in administration costs,non-N fertiliser, standing charges, depreciation and repairs and maintenance. Yet high costs ingreenfeed cropping and pasture maintenance. Lifting pasture harvest without increasing costswould dilute these costs over a larger base, improving the KPI.

HUMAN RESOURCES

Your HR Scoreis 7.9/15 compared to the Average of 7.4/15.

These results have been compiled by comparing all participants in the DBOY competition.Areas that reflect good people management include good staff stability, low non-wage costs,low non scheduled hours lost, investment in formal training, high labour utilisation, and low

direct wage costs.

See No8HR report and appendices for more detail.


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ENVIRONMENTAL IMPACT

Your Environmental Scoreis 60%.

The environmental assessment covered four areas of farm management that are important for

designing and running sustainable and resilient agri-businesses. These measures are:productivity, efficiency, effluent management and soil protection.

60% is a reasonably good result. This is derived from reasonable levels of productivity interms of profit/kg N leached combined with low levels of nitrogen and phosphate losses.Progress should be made by expanding the effluent area to further improve the efficiency ofnutrients applied in this resource, this will allow you to lower your use of soluble nitrogenfertiliser.

Planning for constant improvement of nutrient use efficiency by monitoring soil fertilitylevels and aiming for optimum soil nutrient status should be a focus for any farming businesswith the goal of future viability.

Using your Overseer nutrient budget in conjunction with advice from a trained nutrientmanagement specialist will help manage nutrient efficiency.

Environmental protection is vital to the protection of your biggest asset. Maintaining thequality of your land and factoring in efficient use of resource use into your decision makingwill determine the future sustainability of your farm and thus your business.

See Headlands report and appendices for more detail.

HeadlandsDesigning farm systems with the future in mind!

Align your business with your values and maximise profits while operating within

resource constraints.

Our unique approach helps you create a resilient business positioned for long term

success.

Qualified consultants with expertise in effluent system design, nutrient efficiency,

business strategy and finance.

Call us today to optimise your farms potential.

www.headlandsenviro.co.nz


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SUMMARY AND CONCLUSION

Key Business Strengths

Good per cow milk production

Good core per cow costs and core per hectare cost per tDM pasture harvested.

Areas for consideration or further investigation:

Cost of production plus financing

Review effluent and nutrient use and efficiency

Drought resilience review stocking rate or consider summer crops to reducerequirement of extra supplement being imported and ensure cow feed intake ismaintained at a high level.

When implementing new strategies to address these areas of opportunity in your business careshould be taken to ensure your areas of strength are not compromised.

The following pages provide the graphical assessment of your farm business (Dot report),definitions of the KPIs used, and finally details from the Red Sky programme for your farm.Also attached are the environmental and labour analyses of your business. If you have furtherquestions please dont hesitate to contact me, your consultant or any of the team at Intelact,Headlands or No8HR.

Best wishes,

Alanah BunyardIntelact Ltd.


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Summary Farm Performance - DairyD & B Farmer

X FarmLtd

Monday 19 May 2014 15:21

2010/11 X Farm

DBOY

2011/12 X Farm

DBOY

2012/13 X Farm

DBOY

.

2012/13WaikatoAverage

2012/13Waikato Top

10%

PHYSICAL PARAMETERS

Peak Milking Cow Numbers 430 440 440 445 461

Total Effective Dairy Hectares 0.0 155.0 155.0 136.0 126.8Effective Milking Hectares 151.0 149.6 149.0 134.1 123.7

Cows per Milking Hectare 2.85 2.94 2.95 3.32 3.73

Milksolids per Cow 374 425 392 360 405

Milksolids per Milking Hectare 1,064 1,249 1,157 1,196 1,510

Milksolids Price ($/kgMS) $ 7.59 $ 6.07 $ 5.84 $ 5.85 $ 5.85

Pasture Dry Matter Harvested (tDM/Ha) 10.6 12.5 10.7 11.5 13.7

REVENUE

Milk Sales $ 1,255,347 $ 1,183,494 $ 1,068,502 $ 980,247 $ 1,142,602

Total Operating Revenue (TOR) $ 1,314,497 $ 1,207,642 $ 1,151,805 $ 1,075,567 $ 1,244,461

GROSS REVENUE (GR) $ 1,302,737 $ 1,246,842 $ 1,161,405 $ 1,064,551 $ 1,234,636

Gross Revenue per Hectare $ 8,630 $ 8,333 $ 7,794 $ 7,939 $ 9,983

Gross Revenue per Cow $ 3,030 $ 2,834 $ 2,640 $ 2,392 $ 2,678

EXPENSESTotal Operating Expenses (TOE) $ 667,544 $ 840,528 $ 717,378 $ 683,666 $ 686,793

GROSS OPERATING EXPENSES (GOE) $ 821,720 $ 965,003 $ 940,252 $ 859,974 $ 841,195

Gross Operating Expenses per Hectare $ 5,443 $ 6,449 $ 6,310 $ 6,414 $ 6,801

Gross Operating Expenses per Cow $ 1,911 $ 2,193 $ 2,137 $ 1,933 $ 1,825

Debt Servicing & Non-Operating Expenses

Total Debt Servicing & Non-Operating Exp $ 287,308 $ 263,170 $ 265,626 $ 375,630 $ 383,223

Operating Surplus (TOR - TOE) $ 646,953 $ 367,114 $ 434,427 $ 391,901 $ 557,668

Change in Working Capital $ 69,062 ($ 543,324) $ 162,975 $ 10,778 $ 44,689

KEY PERFORMANCE INDICATORS

OPERATING PROFIT (GR - GOE) $ 481,016 $ 281,839 $ 221,153 $ 204,577 $ 393,441

Operating Profit per Hectare $ 3,186 $ 1,884 $ 1,484 $ 1,526 $ 3,181

Operating Profit per Cow $ 1,119 $ 641 $ 503 $ 460 $ 853

Total Assets per Ha at Start of Year (4-Yr Av Values) $ 51,445 $ 50,737 $ 49,733 $ 66,129 $ 66,717Total Assets per Ha at Start of Year (Market Values) $ 51,445 $ 50,737 $ 49,733 $ 66,802 $ 67,163

Total Assets at End of Year at 4-Yr Av Values $ 7,883,572 $ 8,107,464 $ 8,344,747 $ 8,960,556 $ 8,492,836

Total Liabilities at End of Year $ 2,774,723 $ 2,972,148 $ 3,174,915 $ 3,196,435 $ 2,904,315

EQUITY at 4-Yr Av Values at End of Year $ 5,108,849 $ 5,135,316 $ 5,169,832 $ 5,764,120 $ 5,588,521

EQUITY % at 4-Yr Av Values 64.8 % 63.3 % 62.0 % 64.3 % 65.8 %

Change in Equity at 4-Yr Av Values ($ 374,121) $ 45,787 $ 433,416 $ 166,453 $ 342,354

RETURN ON CAPITAL (ROC) at 4-Yr Av Values 6.4 % 4.2 % 3.3 % 3.0 % 5.2 %

Return on Assets (ROA) at 4-Yr Av Values 6.4 % 4.2 % 3.1 % 2.9 % 5.1 %

ROA including Capital Gain at 4-Yr Av Values 1.7 % 3.9 % 8.3 % 4.9 % 9.3 %

RETURN ON EQUITY (ROE) at 4-Yr Av Values 5.4 % 2.5 % 0.6 % -0.8 % 2.7 %

ROE including Capital Gain at 4-Yr Av Values -1.6 % 2.1 % 9.1 % 2.2 % 9.2 %

OPERATING PROFIT MARGIN 36.9 % 22.6 % 19.0 % 19.2 % 31.9 %

Cost of Production per kg Milksolids $ 4.82 $ 4.82 $ 4.92 $ 4.84 $ 4.01Financing Costs per kg Milksolids $ 1.41 $ 1.09 $ 1.29 $ 1.97 $ 1.61

Cost of Prodn + Financing Cost per kgMS $ 5.96 $ 5.66 $ 6.03 $ 6.39 $ 5.37

Total Operating Expenses as % Gross Revenue 51.2 % 67.4 % 61.8 % 64.2 % 55.6 %

Financing Costs as % Gross Revenue 17.4 % 16.3 % 19.2 % 29.7 % 24.3 %

Core per Cow Cost $ 613 $ 699 $ 577 $ 617 $ 559

Core per Hectare Cost $ 846 $ 1,330 $ 956 $ 1,170 $ 1,200

Core per Hectare Cost per tDM Pasture Harvest $ 80 $ 106 $ 89 $ 101 $ 87

Management + Staff Costs per Cow $ 474 $ 553 $ 548 $ 422 $ 361

Cows per Full Time Staff Equivalent 106 131 131 147 176

Total Feed/Supplement Costs per Cow $ 624 $ 575 $ 777 $ 705 $ 706

Pasture as % of Total Consumed 73.3 % 76.1 % 65.1 % 73.7 % 72.0 %

Average Cost of All Consumed Feed (/tDM) $ 337 $ 334 $ 326 $ 358 $ 321

Pasture Cost (Per tDM) $ 306 $ 311 $ 305 $ 331 $ 291Forage Cost (/tDM Consumed incl.wastage) $ 452 $ 428 $ 350 $ 433 $ 397

Concentrate Cost (/tDM Consumed incl.wastage) $ 406 $ 396 $ 385 $ 435 $ 404


14/22

Physical Summary - DairyD & B Farmer

XFarmLtd

Monday 19 May 2014 15:22

2010/11 X Farm

DBOY

2011/12 X Farm

DBOY

2012/13 X Farm

DBOY

.


2012/13Waikato Top

10%

PHYSICAL PARAMETERS

Peak Milking Cow Numbers 430 440 440 445 461

Effective Milking Hectares 151.0 149.6 149.0 134.1 123.7Cows per Milking Hectare 2.85 2.94 2.95 3.32 3.73

Cow Liveweight per Milking Hectare 1,367 1,470 1,476 1,596 1,812

Comparative Stocking Rate (Red Sky) 101.0 96.7 131.1 130.4 125.8

Comparative Stocking Rate (DairyNZ) 0.0 0.0 114.3 100.2 102.5

Milksolids Price ($/kgMS) $ 7.59 $ 6.07 $ 5.84 $ 5.85 $ 5.85

Total Milksolids (Milkfat + Protein) 160,643 186,932 172,346 160,341 186,782

Milksolids per Cow 374 425 392 360 405

Milksolids as Percent of Cow Liveweight 0.0 % 85.0 % 78.3 % 74.9 % 83.4 %

Milksolids per Milking Hectare 1,064 1,249 1,157 1,196 1,510

Milkfat Percentage 4.66 % 4.58 % 4.76 % 4.93 % 4.90 %

Protein Percentage 3.55 % 3.61 % 3.55 % 3.71 % 3.75 %

Protein as a Percentage of Milkfat 76.2 % 78.8 % 74.6 % 75.3 % 76.5 %

PRODUCTIVITY MEASURE

Red Sky Dairy Productivity Ratio 0.77 0.87 0.89 0.72 0.88PASTURE & SUPPLEMENTS

Pasture Dry Matter Harvested (tDM/Ha) 10.6 12.5 10.7 11.5 13.7

Estimated Dryland Pasture Harvest (tDM/Ha) 10.6 12.5 10.7 11.5 13.7

Estimated Irrigated Pasture Harvest (tDM/Ha) 0.0 0.0 0.0 12.1 14.3

Nitrogen Applied per Hectare 140.0 180.0 175.0 161.3 196.2

Pasture as % of Total Consumed 73.3 % 76.1 % 65.1 % 73.7 % 72.0 %

Supplement as % of Total Consumed 26.7 % 23.9 % 34.9 % 26.3 % 28.0 %

- Forage as % of Total Consumed 10.8 % 9.3 % 19.7 % 16.2 % 17.5 %

- Concentrate as % of Total Consumed 15.9 % 14.6 % 15.2 % 10.1 % 10.5 %

Pasture Consumed Per Cow (estimated tDM) 3.48 3.93 3.22 3.33 3.49

Forage Consumed Per Cow (estimated tDM) 0.59 0.55 1.13 0.85 0.98

Concentrate Consumed Per Cow (estimated tAF) 0.74 0.74 0.73 0.44 0.50

Total Consumed Per Cow (estimated tDM) 4.74 5.15 5.01 4.58 4.94

Feed Conversion Efficiency (kgsDM/kgMS) 12.46 11.94 12.37 12.25 11.71

Total Feed/Supplement Costs per Cow $ 624 $ 575 $ 777 $ 705 $ 706

Average Cost of All Consumed Feed (/tDM) $ 337 $ 334 $ 326 $ 358 $ 321

Pasture Cost (Per tDM) $ 306 $ 311 $ 305 $ 331 $ 291

- Direct Pasture Cost (Per tDM) $ 39 $ 65 $ 72 $ 64 $ 63

- Variable Pasture Cost (Per tDM) $ 62 $ 87 $ 49 $ 53 $ 42

- Capital Pasture Cost (Per tDM) $ 205 $ 159 $ 184 $ 215 $ 185

Average Cost of All Supplements (/tDM Consumed) $ 424 $ 408 $ 365 $ 434 $ 399

Forage Cost (/tDM Consumed incl.wastage) $ 452 $ 428 $ 350 $ 433 $ 397

- Purchased Forage Cost (Per tDM) $ 284 $ 256 $ 231 $ 281 $ 268

- Variable Forage Cost (Per tDM) $ 53 $ 65 $ 58 $ 50 $ 40

- Capital Forage Cost (Per tDM) $ 50 $ 42 $ 31 $ 34 $ 26

Home Produced Forage as Percent of Total 0.0 % 66.7 % 100.0 % 33.1 % 44.3 %

Concentrate Cost (/tDM Consumed incl.wastage) $ 406 $ 396 $ 385 $ 435 $ 404 - Purchased Concentrate Cost (Per tDM) $ 357 $ 344 $ 352 $ 395 $ 368

- Variable Concentrate Cost (Per tDM) $ 13 $ 19 $ 11 $ 12 $ 10

- Capital Concentrate Cost (Per tDM) $ 16 $ 13 $ 14 $ 8 $ 7

Pasture Cost (Cents Per MJ ME) 2.78 2.83 2.78 3.01 2.64

Forage Cost (Cents Per MJ ME Consumed) 4.30 4.08 3.33 4.11 3.79

Concentrate Cost (Cents Per MJ ME Consumed) 3.69 3.60 3.50 3.63 3.37

Pasture Dry Matter Harvested / Megalitre (tDM) 0.0 0.0 0.0 1.2 1.3

Megalitres Used per Hectare 0.0 0.0 0.0 10.3 10.7

MANAGEMENT & STAFF

Total 50-Hour Week Equivalent Full Time Staff 4.5 3.6 3.6 3.2 2.8

Cows per Full Time Staff Equivalent 106 131 131 147 176

Management + Staff Costs per Cow $ 474 $ 553 $ 548 $ 422 $ 361

Revenue per Full Time Staff Equivalent $ 290,789 $ 346,345 $ 322,612 $ 329,042 $ 436,499

Revenue per $1 of Employment Expense $ 6.39 $ 5.13 $ 4.82 $ 5.64 $ 7.39Total Hours Worked per Week 224.0 180.0 180.0 161.8 141.4

Total Imputed Labour & Management $ 57,280 $ 72,400 $ 72,400 $ 59,978 $ 61,964


15/22

Financial Farm Performance - DairyD & B Farmer

XFarmLtd

Monday 19 May 2014 16:14

2010/11 X Farm

DBOY

2011/12 X Farm

DBOY

2012/13 X Farm

DBOY

.


2012/13Waikato Top

10%

BALANCE SHEET ASSESSMENT

Total Assets at End of Year at Market Values $ 7,883,572 $ 8,107,464 $ 8,344,747 $ 9,049,639 $ 8,559,635

Total Assets at End of Year at 4-Yr Av Values $ 7,883,572 $ 8,107,464 $ 8,344,747 $ 8,960,556 $ 8,492,836

Total Liabilities at End of Year $ 2,774,723 $ 2,972,148 $ 3,174,915 $ 3,196,435 $ 2,904,315

EQUITY at Market Values $ 5,108,849 $ 5,135,316 $ 5,169,832 $ 5,853,203 $ 5,655,320

Change in Equity at Market Values ($ 374,121) $ 45,787 $ 433,416 $ 163,994 $ 352,590

EQUITY % at Market Values 64.8 % 63.3 % 62.0 % 64.7 % 66.1 %

EQUITY at 4-Yr Av Values $ 5,108,849 $ 5,135,316 $ 5,169,832 $ 5,764,120 $ 5,588,521

Change in Equity at 4-Yr Av Values ($ 374,121) $ 45,787 $ 433,416 $ 166,453 $ 342,354

EQUITY % at 4-Yr Av Values 64.8 % 63.3 % 62.0 % 64.3 % 65.8 %

Change in Equity at 4-Yr Av Values -6.8 % 0.9 % 9.2 % 3.0 % 6.5 %

PROFIT & LOSS FOR YEAR

Gross Revenue $ 1,302,737 $ 1,246,842 $ 1,161,405 $ 1,064,551 $ 1,234,636

Gross Operating Expenses $ 821,720 $ 965,003 $ 940,252 $ 859,974 $ 841,195

OPERATING PROFIT/(LOSS) $ 481,016 $ 281,839 $ 221,153 $ 204,577 $ 393,441

Operating Profit/(Loss) per Hectare $ 3,186 $ 1,884 $ 1,484 $ 1,526 $ 3,181

RETURN ON CAPITAL (ROC) at 4-Yr Av Values 6.4 % 4.2 % 3.3 % 3.0 % 5.2 %

Return on Assets (ROA) at Market Values 6.4 % 4.2 % 3.1 % 2.9 % 5.1 %

Return on Assets (ROA) at 4-Yr Av Values 6.4 % 4.2 % 3.1 % 2.9 % 5.1 %

Capital Efficiency Ratio at 4-Yr Av Values 15.8 % 15.9 % 15.1 % 12.2 % 15.1 %

Profit/(Loss) incl. Capital Gain at Market Values $ 94,655 $ 264,426 $ 620,969 $ 368,670 $ 745,955

Profit/(Loss) incl. Capital Gain at 4-Yr Av Values $ 94,655 $ 264,426 $ 620,969 $ 371,129 $ 735,719

ROA incl. Capital Gain at 4-Yr Av Values 1.7 % 3.9 % 8.3 % 4.9 % 9.3 %

PROFIT (LOSS) incl. Financing Costs $ 253,778 $ 78,739 ($ 1,251) ($ 99,960) $ 101,795

Return on Equity (ROE) at 4-Yr Av Values 5.4 % 2.4 % 0.6 % -0.8 % 2.7 %

ROE incl. Capital Gain at 4-Yr Av Values -1.6 % 2.1 % 9.1 % 2.2 % 9.2 %

RISK RATIOS

Operating Profit Margin 36.9 % 22.6 % 19.0 % 19.2 % 31.9 %

Total Operating Exp. as % Gross Revenue 51.2 % 67.4 % 61.8 % 64.2 % 55.6 %

Financing Costs as % Gross Revenue 17.4 % 16.3 % 19.2 % 29.7 % 24.3 %

Cost of Production per kg Milksolids $ 4.82 $ 4.82 $ 4.92 $ 4.84 $ 4.01


16/22

Operating Profit Per Hectare - DairyD & B Farmer

XFarmLtd

Monday 19 May 2014 16:14

2010/11 X Farm

DBOY

2011/12 X Farm

DBOY

2012/13 X Farm

DBOY

.


2012/13Waikato Top

10%

REVENUE

Manufacturing Milk Sales $ 8,080 $ 7,583 $ 6,754 $ 6,995 $ 8,835

Quota/Contract/Dividends for Milk $ 235 $ 326 $ 416 $ 315 $ 404

Livestock Revenue $ 250 $ 412 $ 589 $ 534 $ 669

Other Revenue $ 64 $ 12 $ 34 $ 95 $ 75

Gross Revenue $ 8,630 $ 8,333 $ 7,794 $ 7,939 $ 9,983

EXPENSES

Administration $ 95 $ 126 $ 100 $ 121 $ 114

Animal Health $ 412 $ 412 $ 335 $ 268 $ 282

Breeding & Herd Testing $ 196 $ 225 $ 154 $ 159 $ 171

Dairy Shed Expenses $ 88 $ 108 $ 113 $ 82 $ 91

Electricity $ 94 $ 99 $ 110 $ 140 $ 153

Feeds / Supplements (Total) $ 1,778 $ 1,691 $ 2,295 $ 2,339 $ 2,633

- Grazing / Support Area $ 372 $ 422 $ 432 $ 762 $ 759

- Cropping (green feed) $ 38 $ 25 $ 73 $ 37 $ 37

- Grains, Pellets & Concentrates $ 851 $ 860 $ 858 $ 618 $ 731

- Forages (incl. hay, silages, byproducts) $ 517 $ 384 $ 932 $ 923 $ 1,106

Fertiliser (Total) $ 245 $ 552 $ 370 $ 504 $ 593

- Nitrogen $ 132 $ 249 $ 301 $ 233 $ 288

- Phosphate & All Other Fertiliser $ 112 $ 303 $ 69 $ 271 $ 305

Freight $ 27 $ 37 $ 26 $ 27 $ 27

Irrigation $ 0 $ 2 $ 0 $ 58 $ 88

Other Expenses $ 19 $ 38 $ 15 $ 13 $ 13

Pasture Maintenance & Renovation $ 0 $ 105 $ 165 $ 112 $ 116

Repairs & Maintenance $ 348 $ 727 $ 207 $ 270 $ 276

Standing charges $ 164 $ 192 $ 205 $ 215 $ 228

Vehicle Expenses (including fuel & oil) $ 152 $ 200 $ 275 $ 215 $ 231

Management & Staff Expenses $ 1,349 $ 1,626 $ 1,617 $ 1,400 $ 1,347

- Wages, Salaries & Employment Exp. $ 970 $ 1,142 $ 1,131 $ 953 $ 846

- Imputed Labour & Management $ 379 $ 484 $ 486 $ 447 $ 501

Depreciation $ 418 $ 310 $ 322 $ 489 $ 438

Gross Expenses $ 5,443 $ 6,449 $ 6,310 $ 6,414 $ 6,801

Gross Exp excl. Imputed Labour/Mgmt & Dep'n $ 4,646 $ 5,655 $ 5,502 $ 5,478 $ 5,862

Core per Hectare Cost $ 846 $ 1,330 $ 956 $ 1,170 $ 1,200

OPERATING PROFIT (LOSS) $ 3,186 $ 1,884 $ 1,484 $ 1,526 $ 3,181


17/22

Operating Profit Per Cow - DairyD & B Farmer

XFarmLtd

Monday 19 May 2014 16:14

2010/11 X Farm

DBOY

2011/12 X Farm

DBOY

2012/13 X Farm

DBOY

.


2012/13Waikato Top

10%

REVENUE

Manufacturing Milk Sales $ 2,837 $ 2,579 $ 2,288 $ 2,108 $ 2,370

Quota/Contract/Dividends for Milk $ 83 $ 111 $ 141 $ 95 $ 108

Livestock Revenue $ 88 $ 140 $ 199 $ 161 $ 179

Other Revenue $ 22 $ 4 $ 12 $ 29 $ 20

Gross Revenue $ 3,030 $ 2,834 $ 2,640 $ 2,392 $ 2,678

EXPENSES

Administration $ 33 $ 43 $ 34 $ 36 $ 31

Animal Health $ 145 $ 140 $ 114 $ 81 $ 76

Breeding & Herd Testing $ 69 $ 76 $ 52 $ 48 $ 46

Dairy Shed Expenses $ 31 $ 37 $ 38 $ 25 $ 25

Electricity $ 33 $ 34 $ 37 $ 42 $ 41

Feeds / Supplements (Total) $ 624 $ 575 $ 777 $ 705 $ 706

- Grazing / Support Area $ 131 $ 143 $ 146 $ 230 $ 204

- Cropping (green feed) $ 13 $ 9 $ 25 $ 11 $ 10

- Grains, Pellets & Concentrates $ 299 $ 292 $ 290 $ 186 $ 196

- Forages (incl. hay, silages, byproducts) $ 182 $ 131 $ 316 $ 278 $ 297

Fertiliser (Total) $ 86 $ 188 $ 125 $ 152 $ 159

- Nitrogen $ 47 $ 85 $ 102 $ 70 $ 77

- Phosphate & All Other Fertiliser $ 39 $ 103 $ 23 $ 82 $ 82

Freight $ 10 $ 12 $ 9 $ 8 $ 7

Irrigation $ 0 $ 1 $ 0 $ 17 $ 23

Other Expenses $ 7 $ 13 $ 5 $ 4 $ 4

Pasture Maintenance & Renovation $ 0 $ 36 $ 56 $ 34 $ 31

Repairs & Maintenance $ 122 $ 247 $ 70 $ 81 $ 74

Standing charges $ 58 $ 65 $ 70 $ 65 $ 61

Vehicle Expenses (including fuel & oil) $ 53 $ 68 $ 93 $ 65 $ 62

Management & Staff Expenses $ 474 $ 553 $ 548 $ 422 $ 361

- Wages, Salaries & Employment Exp. $ 341 $ 388 $ 383 $ 287 $ 227

- Imputed Labour & Management $ 133 $ 165 $ 165 $ 135 $ 134

Depreciation $ 147 $ 105 $ 109 $ 147 $ 118

Gross Expenses $ 1,911 $ 2,193 $ 2,137 $ 1,933 $ 1,825

Gross Exp excl. Imputed Labour/Mgmt & Dep'n $ 1,631 $ 1,923 $ 1,863 $ 1,650 $ 1,573

Core per Cow Cost $ 613 $ 699 $ 577 $ 617 $ 559

OPERATING PROFIT (LOSS) $ 1,119 $ 641 $ 503 $ 460 $ 853


18/22

Operating Profit Per MilkSolidsD & B Farmer

X FarmLtd

Monday 19 May 2014 16:15

2010/11 X Farm

DBOY

2011/12 X Farm

DBOY

2012/13 X Farm

DBOY .


2012/13Waikato Top

10%

REVENUE

Manufacturing Milk Sales $ 7.59 $ 6.07 $ 5.84 $ 5.85 $ 5.85

Quota/Contract/Dividends for Milk $ 0.22 $ 0.26 $ 0.36 $ 0.26 $ 0.27

Livestock Revenue $ 0.24 $ 0.33 $ 0.51 $ 0.45 $ 0.44

Other Revenue $ 0.06 $ 0.01 $ 0.03 $ 0.08 $ 0.05

Gross Revenue $ 8.11 $ 6.67 $ 6.74 $ 6.64 $ 6.61

EXPENSES

Administration $ 0.09 $ 0.10 $ 0.09 $ 0.10 $ 0.08

Animal Health $ 0.39 $ 0.33 $ 0.29 $ 0.22 $ 0.19

Breeding & Herd Testing $ 0.18 $ 0.18 $ 0.13 $ 0.13 $ 0.11

Dairy Shed Expenses $ 0.08 $ 0.09 $ 0.10 $ 0.07 $ 0.06

Electricity $ 0.09 $ 0.08 $ 0.10 $ 0.12 $ 0.10

Feeds / Supplements (Total) $ 1.67 $ 1.35 $ 1.98 $ 1.96 $ 1.74

- Grazing / Support Area $ 0.35 $ 0.34 $ 0.37 $ 0.64 $ 0.50

- Cropping (green feed) $ 0.04 $ 0.02 $ 0.06 $ 0.03 $ 0.02

- Grains, Pellets & Concentrates $ 0.80 $ 0.69 $ 0.74 $ 0.52 $ 0.48

- Forages (incl. hay, silages, byproducts) $ 0.49 $ 0.31 $ 0.81 $ 0.77 $ 0.73

Fertiliser (Total) $ 0.23 $ 0.44 $ 0.32 $ 0.42 $ 0.39

- Nitrogen $ 0.12 $ 0.20 $ 0.26 $ 0.19 $ 0.19

- Phosphate & All Other Fertiliser $ 0.11 $ 0.24 $ 0.06 $ 0.23 $ 0.20

Freight $ 0.03 $ 0.03 $ 0.02 $ 0.02 $ 0.02

Irrigation $ 0.00 $ 0.00 $ 0.00 $ 0.05 $ 0.06

Other Expenses $ 0.02 $ 0.03 $ 0.01 $ 0.01 $ 0.01

Pasture Maintenance & Renovation $ 0.00 $ 0.08 $ 0.14 $ 0.09 $ 0.08

Repairs & Maintenance $ 0.33 $ 0.58 $ 0.18 $ 0.23 $ 0.18

Standing charges $ 0.15 $ 0.15 $ 0.18 $ 0.18 $ 0.15

Vehicle Expenses (including fuel & oil) $ 0.14 $ 0.16 $ 0.24 $ 0.18 $ 0.15

Management & Staff Expenses $ 1.27 $ 1.30 $ 1.40 $ 1.17 $ 0.89

- Wages, Salaries & Employment Exp. $ 0.91 $ 0.91 $ 0.98 $ 0.80 $ 0.56

- Imputed Labour & Management $ 0.36 $ 0.39 $ 0.42 $ 0.37 $ 0.33

Depreciation $ 0.39 $ 0.25 $ 0.28 $ 0.41 $ 0.29

Gross Expenses $ 5.12 $ 5.16 $ 5.46 $ 5.36 $ 4.50

Gross Exp excl. Imputed Labour/Mgmt & Dep'n $ 4.37 $ 4.53 $ 4.76 $ 4.58 $ 3.88

Core Cost Structure per kg Milksolid $ 3.71 $ 3.97 $ 3.65 $ 3.83 $ 3.04

OPERATING PROFIT (LOSS) $ 2.99 $ 1.51 $ 1.28 $ 1.28 $ 2.11


19/22

Red Sky Farm Performance Analysis

Red Sky Agricultural Pty Ltd 1

Red Sky KEY PERFORMANCE INDICATORS DAIRY

The following Key Performance Indicators are all included in Red Sky Farm Performance Analysisand are split between FOUR of the five primary measures: Profitability, Efficiency, Risk andSolvency. The fifth measure, Liquidity, relates to cash flow and Key Performance Indicators forthis measure are available in additional reports. These Key Performance Indicators are notmeant to be an exhaustive list but are meant to represent the more important indicators that

farmers should monitor regularly.

PROFITABILITY

The following measures assess the level of profitability of a business. The first four measureslisted below directly describe the performance of the business with the top two being reliablecomparative measures across districts, and between farming enterprises and even countries.The final two physical measures can only be used to indicate the likely level of profit and theyrely on a correlation factor rather than assessing profit directly.

Return on Capital =Operating Profit / Total Assets under Management at Start of Year x 100.This should be assessed with capital gains/losses both included and excluded. Thispercentage measure of profitability records the return on total assets employed in thebusiness and is arguably the most important measure of business performance.

Operating Profit per Hectare = Operating Profit / Effective Milking Area. This measure ofprofitability records the level of profit against the largest capital asset of the business andas a result should be closely correlated to Return on Assets, although it needs to beinterpreted in light of the wide variation in land values.

Return on Equity =Operating Profit Total Financing Costs / Equity at Start of Year x 100.

This should be assessed with capital gains/losses both included and excluded. Thispercentage measure of profitability records the return on equity utilised in the business.

Pasture Dry Matter Harvested (tDM/ha) this is the equivalent tonnage of 11.0 MJ

ME/kgDM pasture consumed per hectare. Any hay and silage conserved on the farm isincluded in the total pasture yield. This is a measure that is correlated to profitability inpasture based farming systems, although it needs to be interpreted for land quality andfarming system (e.g. good versus poor soils, irrigation versus dryland).

EFFICIENCYMeasures of efficiency assess the level of performance of a business in a specific area. The

measures below assess performance in the use of assets, pasture, supplements and staff.Improvements in efficiency in one particular area may not necessarily lead to an improvementin profitability but will provide definitive insights into how profitability might be improved.

Milksolids per Hectare this records the amount of milk produced per hectare and as a resultis closely related to gross revenue per hectare and would indicate the likely level of

productivity of the business. This is a measure that is correlated to profitability in pasturebased farming systems with low to moderate levels of supplement, although it needs to beinterpreted in light of the wide variation in farming systems.

Pasture Cost (per tDM) =Direct Pasture Cost + Variable Pasture Cost + Capital Pasture Cost.

This is a complete assessment of pasture costs (not a gross margin cost) and is a measureof how efficiently pasture is being grown and fed to livestock.

Forage Cost (per tDM Consumed including Wastage) =(Purchased Forage Cost + VariableForage Cost + Capital Forage Cost) / Weighted Average Wastage Rate. This is a completeassessment of forage costs (not a gross margin cost) and is a measure of how efficientlyforages are being purchased and fed to livestock.

Concentrate Cost (per tDM Consumed including Wastage) =(Purchased Concentrate Cost+ Variable Concentrate Cost + Capital Concentrate Cost) / Weighted Average WastageRate. This is a complete assessment of concentrate costs (not a gross margin cost) and isa measure of how efficiently concentrates are being purchased and fed to livestock.

Cows per Full Time Staff Equivalent = Peak Milking cow Numbers / Total 50-Hour WeekEquivalent Full Time Staff. This measure of efficiency records the number of cows that arebeing milked per 50-Hour Full Time Staff Equivalent.


20/22

Red Sky Farm Performance Analysis

Red Sky Agricultural Pty Ltd 2

Core per Cow Cost = (Animal Health + Breeding + Dairy Shed Expenses + Electricity +

Grazing/Agistment + Freight + Other Expenses + 50% Repairs & Maintenance + 30%Standing Charges + 70% Vehicle Expenses + 50% Depreciation) / Peak Milking CowNumbers. This measure of efficiency determines the underlying livestock cost structure ofthe business after removing the major cost centres influenced by different farmingsystems.

Core per Hectare Cost per tDM Pasture Harvest =(Administration + Cropping (green feed)+ Phosphate & All Other Fertiliser + Pasture Maintenance & Renovation + 50% Repairs &Maintenance + 70% Standing Charges + 30% Vehicle Expenses + Weed & Pest + 50%Depreciation) / Effective Milking Area / tDM Pasture Harvest. This measure of efficiencydetermines the underlying land cost structure of the business after removing the majorcost centres influenced by different farming systems.

RISK

Measures of risk assess the degree to which a business may move between profit and loss.These measures can not be assessed as either better or worse in one business compared toanother, nor do these measures predict profit, as this will depend on the farming system beingrun. Highly productive farming systems may have a higher risk profile but this may beessential to attain higher levels of profit. However the higher risk profile does mean that they

may be more exposed to changes in product prices or supplement prices.

Operating Profit Margin =Operating Profit / Gross Revenue x 100. This percentage measureof risk records the proportion of Gross Revenue that is retained as profit. As this measuretakes account of changes to the amount of livestock and feed on hand, depreciation,imputed labour and management, and other adjustments to revenue and expenses, this is

a more complete measure than Operating Expenses as % of Gross Revenue.

Cost of Production per kg Milk (or Gross Operating Expenses less Non-Milk Revenue per kgMilk) = (Manufacturing Milk Sales Operating Profit) / Total Milk Sold. This measure ofrisk records the effective nett cost of producing each kilogram of milk and can be used forbreak-even analysis.

Pasture as % of Total Consumed =Energy Consumed from Pasture on Farm / Total EnergyConsumed by Livestock on Farm x 100. This percentage measure of risk records theproportion of the overall diet that is composed of pasture grown on the farm.

SOLVENCY

Measures of solvency assess the confidence with which a business can meet its financialobligations as they fall due. These measures can not be assessed as either better or worsein one business compared to another, nor do these measures predict profit. Theappropriateness of the level of debt, and the proportion of revenue being used to service this,should be interpreted after an assessment of the level of predicted or actual profit as well asthe ability and risk profile of the stakeholders.

Equity % =Equity / Total Assets x 100. This is a percentage measure of risk and solvency.

Additional definitions of KEY PERFORMANCE INDICATORS can be viewed atwww.redskyagri.com/file/pdf/RedSkyKPIsDairy.pdf

Definitions of TERMS used in RED SKY can be viewed atwww.redskyagri.com/file/pdf/RedSkyDefinitions.pdf


21/22

KeyPointstoBuildingResilienceintoyourBusiness

1.

Findthebalancebetweenproductionefficiencyandresilience(SweetZone)

2. Developtheabilitytoplanandplantochange

3. Maintainhealthylevelsofequity

4.

Testandmitigateyourbusinessfordownsiderisk(lowmilkpayout/droughtetc)

5. Captureupsideriskifyoucanwithoutincreasingbusinessrisk(debt/capitalinfrastructure)

6.

Farmwithintheconstraintsofyourspecificfarm

(Soil,water,climate,animals,HRskills,riskpreferences)

7.

Enjoywhatyouaredoingandcreateahighlevelofwellbeing

TheSweetZone

Findingthebalanceforyourfarmingbusinessbetween

diminishingmarginal

returns,

profit

and

productivity,

and

risk.

Thegraphsbelowillustratethatincreasingmilkproductionandtheintensityofafarmingsystem(blueline)through

greaterinputsisnotlinear.Thereisadiminishingreturnoncapitalwithincreasedintensityandrisk(yellowline).

Increasedbusinessriskassociatedwithincreasedfarmingintensitymeansthatvolatility(i.e.;climatic,irrigation

constraints,commodityprices)canresultinheightenedvulnerabilityandincreasedriskoffailuretothebusiness.

ThegreenzoneintheseillustrationsindicatestheSweetZone.

Over the lastdecade the rangeof farm systems in

N.Z has broadened. With a considerable swing

towardssystem4and5farms,usinghigherlevelsof

importedsupplementary

feeds.

The range of dairy farming systems as defined by

theDairyNZclassificationsystemare:

1. Allselfcontained

2. 414%feedimported

3. 1020%feedsimportedtoextendlactation

4. 2030%ofoverallfeedsimported

5.

2550%

of

feeds

imported

all

year

Keepingfarmsacrossalloftheabove classification

systems in the Sweet Zone means creating

farming systems that have a higher level of

resilience and an ability to absorb the shocks

createdbyvolatility.Thesefarmsystemsareableto

manage shocks well because the farmer has an

optimisedsystem inplacetomaintaincostcontrol,

resourceefficiencyanddecisionmakingprocesses.


22/22

TIPS FORINCREASING YOURDBOYHRSCORE

Well done on entering the DBOY of the year competition. In the HR section of the

competition we measure the outputs that good HR practices will deliver for your business.

Below are some tips on the inputs that will help you achieve these:

1. Have a c lear strategy in place to attract and retain the best people. Understand

what you have to offer employees in comparison to other dairy farms. We

recommend looking at the unique things about you (as business owners), your

managers and your farm that are marketable as well as the attributes of your role

(pay, time off, housing, dairy, location etc).

2. Most of our clients want employees with the right attitude and most of our

employees want employers with the right attitude. Clarifying what this means in

terms of your expectations of your employees and also what they want from you

helps you all to be on the same page.

3. Understand the skills, abilities, personality, values and ambitions of your employees will

help you manage each person better. Employers with a good understanding of

each employee can create a plan that overlaps their needs and yours as much aspossible.

4. Involve your employees in the decisions that impact on their work. Although you mayhave strong ideas on how you like things done, allowing your employees input and

the opportunity to discuss things with you will increase their commitment to doing

things your way it will also help you get different ideas on how things can be done

differently and potentially more effectively in your business.

5. A positive team environment is important to most employees. Dealing with conflictquickly and constructively will help create a constructive team environment and

demonstrate leadership in your business.

6. Feedbac k is important to employee motivation. The best employers provideemployees with regular feedback on their performance, accomplishments, learning

requirements and areas for development.

7. Understand what motivates people. Complex reward schemes have little value to

employees who are better motivated by other things (e.g, sincere appreciation).Contrary to popular belief most people are not motivated by money.

8. In dairy businesses with more than one staff, fairness is important. Perception of unfair

treatment can impact on an employees level of engagement and the team

environment. Fairness does not necessarily mean the exac t same treatment ofeveryone in all respects.

2014 dboy example report

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