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HISTORICAL DAIRY FINANCIAL MANAGEMENT RESULTS

Since 1988 we have been analysing the financial performance of a number of dairy farms in south and central KwaZulu-Natal, South Africa.  The number of farm operations analysed started off at about 25 and is currently at 20.  Most farms are predominantly grazing farms, mostly irrigated ryegrass (annual and perennial ryegrass) and dryland kikuyu, with maize silage and hay (Eragrostis curvula or veld) being fed at strategic times.  Dairy meal is fed at the rate of an average of 6.5 to 7.5 kg per cow in milk daily, ranging from zero to 10 kg of meal per head daily.

The graphs and commentary below look at the trends seen over the last 26 years.  The figures are the rolling 12-month averages to February each year.  Please note that monetary figures are expressed in litres per cow in herd monthly, i.e. the unit of currency, rather than Rand, is the average price of a litre of milk for that year.

Please feel free to make use of these figures as you see fit, we ask only that you acknowledge their source. 

We sincerely thank those who have contributed figures over the years - without their data, this analysis would not be possible.

Average herd size has increased virtually every year. Milk sales per cow in milk daily has followed the herd size increase very closely other than in the last two years.
There has been a real increase in milk income from 400 litres/CIH monthly in 1988 to 500 litres in 2003 and 2004 (down from 529 in 2002).  Note that in 2004, the price of milk increased by 13% from the previous year while production per cow showed virtually no change.
There was a sharp drop off in milk income in 2010 (down by 4.3%) with a slight increase in 2011 (up by 2.2%). Between 2012 and 2014 milk income has dropped by 2.2% each year.
Cattle sales income (mostly cull cows) have shown a steady decline, averaging 2.4% per annum.
Over the long term, AI, veterinary costs and medicine expenditure have increased annually in real terms although expenditure appears to be rather erratic.
Other dairy costs (milking machine & bulk tank repairs & maintenance, detergents, dairy consumables etc.) have largely remained unchanged but variable with a small downward trend.
Both cow purchased feeds and total purchased feeds (heifer and calf meals included) have shown regular increases over the years but particularly in 1993/94, because of drought conditions.  The increase in 2003 was due to a sharp increase in the maize price.  In 2010 and 2011 there has been a marked decrease in expenditure on purchased feeds, down 15% from the 2009 level. This increased again to peak in 2013 and dropped off slightly in 2014.
In 2003, the expenditure on cow purchased feeds had increased sharply as a percentage of milk income due to the increase in the price of dairy meal.  In 2004, expenditure on purchased feeds decreased, while meal prices leveled off. Between 2010 and 2011 there was a 10.9% decrease. Thereafter the expenditure increased sharply (by 33.5% over 3 years) to reach an all-time high by 2014.
Home-produced feeds include fertilizer, seed, weed- & pesticides and contractor costs inter alia.  In real terms there has been very little change in expenditure over time.  Fertilizer expenditure shows a slight decreasing trend when expressed in litres. 2009 was of course a notable exception due to exceptionally high fertilizer prices. There has been a sharp drop-off after 2012, much steeper than the the slight decrease in expenditure on fertilizer alone.
Fertilizer expenditure has largely varied between 8 and 9 % of total income since 1994 but was significantly higher before that. In 2011 it dipped down to 7.7% and is currently at 8.12% of total income.
Expenditure on feed (both purchased and farm-produced) has been the highest as a percentage of total income in 2014; even higher than in 1993/94 when complete feed was purchased by many herds and higher than 1994 when fertilizer prices were exceptionally high. This figure has dropped off sharply in 2011 but increase just as sharply thereafter.
Expenditure on labour has decreased steadily since 1994 in real terms.
Total mechanical costs in real terms have stayed surprisingly constant at between 40 and 50 litres per cow in herd monthly.  The real expenditure on fuel and lubricants has increased slowly over time in spite of the escalation in fuel price. The price of diesel has increased by an average of 11.5% pa between Jan 1995 and Jul 2014 (r2=97.1%).
Other fixed costs include electricity, R&M fixed improvements, consumable stores, telephone, stationery & insurance.  There appears to be a slight real decrease in expenditure on these items over the long term.
Since 2011, electricity expenditure continues to increase sharply, reaching an all-time high in 2014.
Net farm income (which does not include financial costs or capital items) increased slowly until 2011 but then took a steep dive, reaching an all-time low in 2014.
Expenditure to net farm income has ranged between 78 and 88 % of turnover and was at 81 % in 2003 and only 76% in 2011. When expressed in litres, costs showed a continued downward trend until 2012, whereafter they increased sharply, reaching an all-time high in 2014.
Financial commitments have been very variable, ranging between 2.5% (2014) and 10% (1992) of turnover.
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