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Investor Presentaiton

The dairy industry in Tasmania A guide for investors 18 Indicative costs of buying a dairy farm in Tasmania Table 7: Farm descriptions Cows milked Number 250 500 750 1 000 Farm area 20 unit HB Replacements carried on-farm 50 unit rotary 50 unit rotary 50 unit rotary Total farm area ha 140 270 380 500 Total effective area ha 115 230 340 450 Irrigation area (50 per cent) ha 58 115 170 225 Milk production Per cow kgMS 400 390 390 380 Total kgMS 100 000 195 000 293 000 380 000 Pasture consumed Irrigated area tDM/ha 12.0 12.0 12.0 12.0 Dryland area tDM/ha 7.0 7.0 7.0 7.0 Average tDM/ha 9.6 9.6 9.6 9.6 Grain fed per cow t/cow 0.9 0.9 0.9 0.9 Labour required Total units FTE Cows per labour unit Cows/FTE w 3.0 83 100 58 5.0 6.5 8.0 115 125 Buying an operating dairy farm is the way most people choose to enter the industry. From that point onwards there are several options for expansion: >> increase output on the current farm >> share farming >> buy extra land >> sell up and buy a larger or more productive farm. This section outlines indicative budgets for the purchase and effective running of a dairy farm business in Tasmania, at the present time. Farms for sale may range in size from around 150 cows to in excess of 1 000. It is generally accepted that a minimum herd size of around 200-250 cows is required for a business to be fully viable at the present time. If past trends continue, this number may increase over time. Depending on a range of factors, actual financial performance may be better or worse than the examples outlined. Prospective investors should consult widely before deciding on a specific farm. A list of useful industry contacts has been provided on the back cover. Farm description Managerial ability is the key factor in determining financial performance. The model farms here assume that management ability is above average. The main profit drivers for dairy farms in Tasmania are: pasture utilisation (and stocking rate) >> labour efficiency >>> milk price. Management has a major role in both pasture utilisation and labour efficiency. It can also affect milk price to some degree, through decisions on time of calving, milk company chosen and by its impact on milk quality. Pasture utilisation is a key profit driver. The model farms outlined below are assumed to have 50 per cent dryland and 50 per cent irrigated pastures with an average pasture consumption of 9.5 tonnes of dry matter per hectare. This is a reasonable average and should be achievable on most farms with good soil fertility and good pasture composition. The main assumptions are outlined in the table on the following page. Bare land value $ per ha $14.000 $14.000 $14.000 $14 000 $ per ha $21 000 $21000 $21 000 $21 000 Dryland Irrigated' Capital investment Land and improvements $ million $2.61m $5.47m $7.53m $9.88m Stock $ million $0.45m $0.89m $1.34m $1.74m Plant and machinery $ million $0.19m $0.22m $0.25m $0.38m Working capital $ million $0.11m $0.19m $0.27m $0.35m Total capital $ million $3.36m $6.78m $9.39m $12.34m Per total ha $ per ha $24 100 $25 200 $24 800 $24 700 Per effective ha $ per ha $29 300 $29 500 $27 700 $27 500 Per cow $ per cow $13 500 $13 600 $12 600 $12 400 Milk price Average for season $/kgMS $5.15 $5.20 $5.20 $5.20 I. Includes water and fixed irrigation infrastructure. Not including centre pivot, long laterals or other. Source: Macquarie Franklin, April 2017 19
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