Evaluating development options for a rain-fed dairy farm in Gippsland

Abstract

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.

Management opportunities for boosting productivity of cool-temperate dairy farms under climate change

“…Pasture is generally the cheapest source of feed for dairy cows and there is a strong positive relationship between farm profit and total pasture dry matter (DM) consumed per hectare (Chapman et al, 2009;Rawnsley et al, 2013). In southern Australia, perennial ryegrass is the most widely sown pasture species on dairy farms, supplying 60% to 70% of the diet for lactating dairy cows due to its high nutritional value and digestibility (Armstrong et al, 2010;Chapman et al, 2008;MacDonald et al, 2010). The reliable production of high quality pasture in Tasmania reduces the demand for supplementary feed and provides a competitive advantage for the dairy industry in comparison to mainland Australia and international producers.…”

A stochastic analysis of the impact of input parameters on profit of Australian pasture-based dairy farms under variable carbon price scenarios

“…comm. ) and used by Armstrong et al (2010), pasture consumption was not a t per ha value because the economic analysis was not based on comparing the stocking rates of the systems and per ha scaling would require multiplying the per cow value by stocking rate. Instead, the data were analysed on per farm basis.…”

“…The distributions were based on 'best fit' of historical data. The data were tested for regression but were adjusted for percentiles according to Armstrong et al (2010). However, using the parameters provided by Heard (2011, pers.…”

“…The representative system was then run annually over 10,000 iterations using @RISK 1 , with purchased feed balancing energy requirements when pasture supply was low as a result of poor rainfall. The risk analysis in this study was based on a Monte Carlo simulation, where the farm outcome such as operating profit was estimated by randomly selecting values from the distributions defined for variable inputs (Armstrong et al, 2010). The presentation of risk in this study was by use of CDF curves (cumulative density functions).…”

“…If farmers are risk-averse, strategies with relatively low variance of income (and sometimes even at the cost of some reduction in expected outcome) may be favoured by farmers over strategies with high variance of income in general (Pannell et al, 2000). Nevertheless, different farming businesses will respond to variability in the operating environment such as fluctuations in pasture availability, price of purchased feeds and price of milk differently (Armstrong et al, 2010).…”