Performance, return and risk of different dairy systems in Australia and New Zealand

Abstract

Changes in the farm operating and policy environments and a need to remain profitable under a cost-price squeeze have contributed to dairy systems in Australia and New Zealand becoming more intensive and complex in recent decades. Farm systems in both countries are now diverse, varying from being based predominantly on pasture with little purchased supplements, to those dependent on high levels of feed supplements and even having zero grazing. Dairy farm performance (defined in this paper as production or technical performance), return (return on assets or profit) and risk (variation in economic performance over time), and intensity of dairy systems was examined using farm survey data, case studies and existing published studies. The level of single technical performance measures, such as milk production, feed conversion efficiency and pasture consumption, prevailing in a business are not guides to the operating profit and return on assets of a business. In addition, when survey data of farm performance was grouped by return on assets, few farms were in the top 25% in successive years. Farms that performed consistently well were characterised by good, but not extreme, technical performance in a range of key areas, which translated to favourable business return (return on asset and profit). The knowledge and skills of farm managers are critical, and means that many different dairy systems can perform well physically and financially and successfully meet farmer goals. The relation between risk and the intensity of dairy systems was also investigated. Options that intensified systems generally resulted in higher net wealth for the farm owner, but almost always at increased risk. The best system for any farmer to operate is one which best meets their multifaceted preferences and goals, regardless of system type.

Evaluating scale and technical efficiency among farms and ranches with a local market orientation

“…It measures how efficiently a firm can create profit using their invested assets in a given year, accounting for the opportunity cost of money. Although not commonly used in profit frontier estimation, the use of a ‘standardized’ measure like ROA may allow some expected and interesting cases (such as lean management farms with few owned assets that compete through aggressively pursuing high end produce and product markets) to emerge more clearly (e.g., Ho et al , 2013; Wolf et al , 2016). In contrast, gross measures, such as operating profit, may mask some interesting aspects of farms participating in direct markets.…”

Trade-offs between profit, production, and environmental footprint on pasture-based dairy farms in the Waikato region of New Zealand

“…Moreover, these impacts concern multiple stakeholders that have diverse goals and are broadly distributed across NZ. First, it is important to maintain or improve profit in this industry, given rising cost pressures (Ho et al, 2013). This is important for farmers themselves, particularly given high debt levels in this industry (Howard et al, 2013), but also for the health of regional and national economies given that it promotes expenditure by producers and thus flows onto other sectors (Schilling et al, 2010).…”

Carbon budgets for an irrigated intensively grazed dairy pasture and an unirrigated winter-grazed pasture

“…These measures support the common New Zealand practice of high-density rotational grazing, where each pasture area is grazed several times per year for short periods of time (1-2 days) at an animal density of order 100 cows ha −1 and then allowed to regrow undisturbed for typically 20-30 days (Moir et al, 2010). The 60 % increase in milksolids production between 1995in New Zealand (DairyNZ, 2014) is a combined result of the expanded area of intensively managed pasture, increasing animal densities and the greater use of supplementary feed (MacLeod and Moller, 2006;Ho et al, 2013). High-density grazing management results in repeated, sudden reductions of leaf area, in contrast to extensive grazing systems, where animals may graze the same pasture for weeks at a time and the leaf area is reduced much more gradually.…”