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A survey of 170 randomly selected, irrigated, dairy farms in northern Victoria and 9 in southern New South Wales was conducted to examine and benchmark the key factors influencing water-use efficiency. Water-use efficiency was defined as the amount of milk (kg milk fat plus protein) produced from pasture per megalitre of water (irrigation plus effective rainfall). Information on water-use, milk production, supplementary feeding, farm size and type, pasture management, and irrigation layout and management was collected for each farm by personal interview for the 1994–95 and 1995–96 seasons. The farms were ranked in the order of water-use efficiency with the average farm compared with the highest and lowest 10% of farms. The range in water-use efficiency was 25–115 kg milk fat plus protein/ML, with the highest 10% averaging 94 kg/ML and the lowest 10% averaging 35 kg/ML. The large range in water-use efficiency indicated potential for substantial improvement on many farms. The high water-use efficiency farms, when compared with the low group: (i) produced a similar amount of milk from less water (387 v. 572 ML) (P<0.05), less land (48 v. 83 ha) (P< 0.05) and a similar number of cows (152 v. 143 cows); (ii) had higher estimated pasture consumption per hectare (11.5 v. 5.5 t DM/ha) (P<0.01) and per megalitre (1.0 v. 0.5 t DM/ML) (P<0.01); (iii) had higher stocking rates (3.2 v. 1.8 cows/ha) (P<0.01); (iv) used higher rates of nitrogen fertiliser (59 v. 18 kg N/ha.year) (P<0.05) and tended to use more phosphorus fertiliser (64 v. 34 kg P/ha.year) (P<0.10); (v) used similar levels of supplementary feed (872 v. 729 kg concentrates/cow); (vi) had higher milk production per cow (396 v. 277 kg fat plus protein) (P<0.05); and (vii) directed a higher proportion of the estimated energy consumed by cows into milk production (53 v. 46%) (P<0.05). The survey data confirmed that irrigated dairy farm systems are complex and variable. For example, the amount of feed brought in from outside the milking area varied from 0 to 74% of the estimated total energy used by a milking herd. There was a large range in the level of supplement input amongst the farms in the high water-use efficiency group, and in the low water-use efficiency group. This indicates that the management of the farming system has a greater impact on the efficiency of water-use on irrigated dairy farms, than the type of system. The data from the survey provide information for individual farms, a measure of the water-use efficiency of the industry, and an indication of the quality of regional land and water resources.

A study was conducted to look at water use efficiency and profitability on an irrigated dairy farm in northern Victoria. For this case study farm, an economic evaluation was performed for various development options that could result in higher water use efficiency, increased profit, and meet the farm owners' objectives. Water use efficiency was defined as the amount of milk (kg milk fat plus protein) produced from pasture per megalitre of water (irrigation plus effective rainfall).The case study farm data indicated that between 1995–96 and 1998–99 there was no simple, direct association between water use efficiency and profitability. The development options considered included building a new dairy and increasing herd size and either increasing the area of irrigated pasture or intensifying on the existing irrigated area. The likely water use efficiency and economic efficiency were estimated for the various development options. The development budgets suggested that intensifying on the existing irrigated land was the most attractive option, if the predicted improvements in water use efficiency were achieved. This option had an internal rate of return of 64%, broke even after 5 years and was compatible with the objectives of the farm owners.Options that resulted in simultaneous increases in water use efficiency, profitability and labour efficiency appear to be more likely to be adopted than options that focus solely on increasing water use efficiency.

A case study and modelling approach was used to examine options for a dairy farm in the high rainfall area of Gippsland (southern Victoria) that would enable it to maintain or increase profit in the future (next 5–10 years) in the face of a continuing ‘cost-price squeeze’. The economic performance of the business under a range of development options, identified by an ‘expert panel’, was analysed for a planning period of 10 years. The options analysed were: (i) increased herd size without purchasing more land, (ii) increased milking area and (iii) purchasing non-milking area for production of conserved fodder. Expanding the milking area by purchasing more land without significantly increasing herd size (reducing stocking rate from 2.5 to 2.1 cows/ha) increased annual operating profit without increasing variability in profit between years compared with the base farm. The increased profit resulted from a reduction in the amount of purchased feed. The purchase of an additional outblock for fodder production reduced risk compared with the base farm system, but did not improve the profitability of the farm system. Other options significantly reduced profit while increasing risk. The most appropriate changes to dairy farm businesses in response to changes in the operating environment will vary from farm to farm. The analysis suggested that there may be an alternate path to the historical trends of larger and more intensive operations. It has also highlighted the importance of home-grown feed and efficient supplement use to increase or maintain profitability in the medium term.

FutureDairy is a national, multidisciplinary project designed to assist Australian dairy farmers to manage future challenges. FutureDairy is exploring technical, economic and social aspects of technology adoption through an innovative approach that combines methodologies of social research (‘People’), extension (‘System’) and technical research (‘Science’). The technologies being investigated revolve around increasing forage production per unit of land through a complementary forage rotation; evaluating the most efficient use of brought-in feed to increase milk production per ha; and, the incorporation of automatic milking and other technological innovations that would either reduce labour input or allow more precise agriculture. The central strategy of FutureDairy is to utilise ‘knowledge partnerships’ to co-develop knowledge around each of the key areas of investigation; thus a key feature of the project is its linkage with commercial ‘partner’ farmers that explore similar questions to those being investigated at Elizabeth Macarthur Agricultural Institute (NSW Department of Primary Industries), where the technical research is being undertaken. This paper focuses on early findings from the forages module. Work thus far has shown that forage yields in excess of 40 t DM/ha.year are achievable. However, the practicalities of implementing this technology on-farm have already identified new and diverse issues that, unless understood, will jeopardise its effective adaptation by farmers.

The irrigated dairy industry is an important rural industry and confers significant social and economic benefits to Australia. The future prosperity of irrigated dairying will depend on the efficient use of water resources to overcome: (i) limited irrigation water availability, (ii) rising farm production costs, and (iii) the potential negative impacts of irrigation on the environment. This paper overviews the importance of the irrigated dairy industry to Australia, the production system, industry trends and some of the main challenges facing the industry.

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