Factors associated with profitability in pasture-based systems of milk production

Abstract

The global dairy industry needs to reappraise the systems of milk production that are operated at farm level with specific focus on enhancing technical efficiency and competitiveness of the sector. The objective of this study was to quantify the factors associated with costs of production, profitability, and pasture use, and the effects of pasture use on financial performance of dairy farms using an internationally recognized representative database over an 8-yr period (2008 to 2015) on pasture-based systems. To examine the associated effects of several farm system and management variables on specific performance measures, a series of multiple regression models were developed. Factors evaluated included pasture use [kg of dry matter/ha and stocking rate (livestock units/ha)], grazing season length, breeding season length, milk recording, herd size, dairy farm size (ha), farmer age, discussion group membership, proportion of purchased feed, protein %, fat %, kg of milk fat and protein per cow, kg of milk fat and protein per hectare, and capital investment in machinery, livestock, and buildings. Multiple regression analysis demonstrated costs of production per hectare differed by year, geographical location, soil type, level of pasture use, proportion of purchased feed, protein %, kg of fat and protein per cow, dairy farm size, breeding season length, and capital investment in machinery, livestock, and buildings per cow. The results of the analysis revealed that farm net profit per hectare was associated with pasture use per hectare, year, location, soil type, grazing season length, proportion of purchased feed, protein %, kg of fat and protein per cow, dairy farm size, and capital investment in machinery and buildings per cow. Pasture use per hectare was associated with year, location, soil type, stocking rate, dairy farm size, fat %, protein %, kg of fat and protein per cow, farmer age, capital investment in machinery and buildings per cow, breeding season length, and discussion group membership. On average, over the 8-yr period, each additional tonne of pasture dry matter used increased gross profit by €278 and net profit by €173 on dairy farms. Conversely, a 10% increase in the proportion of purchased feed in the diet resulted in a reduction in net profit per hectare by €97 and net profit by €207 per tonne of fat and protein. Results from this study, albeit in a quota limited environment, have demonstrated that the profitability of pasture-based dairy systems is significantly associated with the proportion of pasture used at the farm level, being cognizant of the levels of purchased feed.

The Irish dairy industry – Recent history and strategy, current state and future challenges

“…This was associated with an increase in whole‐farm stocking rate from 1.71 LU/ha to 1.93 LU/ha (Hanrahan et al . ).…”

“…This software allows grassland farmers to benchmark themselves against comparable farmers in terms of grassland management, increasing the adoption of best practices resulting in increased grass utilisation at farm level (Hanrahan et al . ). It currently has over 1600 active users across farmers, advisers and researchers with numbers growing actively.…”

“…Hanrahan et al . () showed that in Irish pasture‐based systems of milk production, each additional tonne of pasture dry matter (DM) utilised per hectare increased net profit by €173. Thorne et al .…”

A description and evaluation of the physical and financial characteristics of dairy farms operating on soil types classified as poorly drained and associated with high rainfall

“…In Ireland's case, pasture‐based systems provide a cost‐benefit advantage due to their ability to convert cheap feed in the form of grazed grass (Dillon et al., ) into low cost milk, in comparison with other feedstuffs (Finneran et al., ), in an environmentally sustainable manner (O'Brien et al., ). Key performance indicators which provide a measurement of such a competitive advantage and are associated with profitability on farm include grass utilization (kg DM/ha), grazing season length (days) and the proportion of purchased feed on farm (Hanrahan et al., ; Kelly et al., ; Läpple et al., ). To rank efficiency performance and to provide a benchmark for farm potential, analysis was required to understand how the top, median and lower efficiency farms are performing nationally across different soil types.…”

“…Grass utilization per ha was calculated using the approach outlined by Hanrahan et al. () using the Unité Fourrage Laitière (UFL) energy system (O'Mara, ), which uses UFL as the unit of energy within the calculations. These calculations account for the energy cost associated with maintenance, milk production, pregnancy, liveweight change and growth of the stock.…”