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24 The dairy industry in Tasmania Table II: 750 cow farm Income Milk sales Stock trading Total income Expenses Total Per effective ha Per cow ($'000) ($/ha) ($/cow) Per kg milk solids ($/kgMS) 1 521 149 4 474 2 028 5.20 438 199 0.51 1 670 4912 2 227 5.71 Shed and cow costs 129 379 172 0.44 Feed costs 462 1,359 616 1.58 Tractor and plant operating 48 141 64 0.16 Repairs to structures and improvement 50 147 67 0.17 General overheads 45 132 60 0.15 Wages (including owner/manager) 336 989 448 1.15 Capital replacement (depreciation) 26 75 34 0.09 Total expenses Profit 1 096 3 222 | 461 3.74 Earnings before interest and tax (EBIT) Return on capital (ROC) 574 1,689 766 1.96 6.1 per cent Source: Macquarie Franklin, April 2017 &Delan DeLaval 5324 A guide for investors 25 Per kg Farm summary A comparison of the four farms is provided in the table below. The analysis shows the potential for return on capital increases with increasing farm size. This is due mainly to a relative reduction in the cost of labour, plus a slightly lower capital outlay per cow. Table 13: Farm summary The slight increase in capital investment per cow between the 250 cow and the 500 cow farms is associated with a shift in the type of dairy, from a herringbone to a rotary shed. The cost per hectare falls after 500 cows, with the nominated 50 bale rotary dairy able to milk up to 1000 cows. Table 12: 1000 cow farm Total Per effective Per cow ha ($'000) ($/ha) ($/cow) milk solids ($/kgMS) Income Milk sales Stock trading Total income Expenses 1976 4 391 1976 5.20 193 429 193 0.51 2 168 4 820 2 169 5.71 Cows milked Number 250 20 unit HB 500 750 1 000 Replacements carried on-farm 50 unit 50 unit rotary rotary 50 unit rotary Shed and cow costs 171 381 171 0.45 Feed costs 614 | 364 614 1.62 Tractor and plant operating 48 107 48 0.13 Capital investment Total Per cow $million $ $3.36m $13 464 $6.79m $9.41m $12.37m $13 583 $12 547 $12 370 Pasture consumed tDM/ha 9.6 9.6 9.6 9.6 Repairs to structures and improvements 65 144 65 0.17 General overheads 122 55 0.14 Irrigation per cent 50% 50% 50% 50% Grain fed t/cow 0.9 0.9 0.9 0.9 Wages (including owner/manager) 403 896 403 1.06 Capital replacement (depreciation) 38 85 38 0.10 | 394 3 099 1 395 3.67 Labour Total units Total expenses Profit Earnings before interest and tax (EBIT) Return on capital (ROC) Source: Macquarie Franklin, April 2017 774 | 720 774 2.04 6.3 per cent FTE 3.0 5.0 6.5 8.0 Cows per unit Cows/FTE 83 100 115 125 Milk price (below long term average) Return on capital' $/Kg MS $5.15 $5.20 $5.20 $5.20 per cent 3.8% 5.0% 6.14% 6.3% 1. Return on capital (EBIT) before capital appreciation. Source: Macquarie Franklin, April 2017

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