A case study:
In the current season we dairy farmers are expecting a milksolid payout reduction in the order of 45% and our district has surplus of pasture available.
My accountant (and/or bank manager) is advising me reduce my feed costs to meet my revised budget. I think I can buy grazing at a lower cost per head per week than what the New Zealand Grazing Company cost estimate is. What should I do?
The dairy farmer found a new grazier priced at $9 per head per week instead of $12 for the 52 weeks and saved $12,480 for the year.
However, he lost;
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$42,480 in production
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$8,000 in extra heifers not in-calf
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$9,200 to replace those extra heifers not in-calf
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Also extra breeding costs, more anoestrus heifers
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Lost days in milk as 3 year olds – slippage
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THEREFORE;
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The actual cost of going to a cheaper grazier was a nett loss of more than $47,200
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$9 vs $12 per week grazing actually takes more days in milk for “cheaper” grazing group to start making a profit.
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Overall performance of this group was still affected negatively 3 years later.