New research into Australian dairy farm profitability has found that farmers need to have a strong focus on feed production for each dollar of investment.
Research papers released this week by Dr Jon Hauser of Xcheque and farm business consultant Neil Lane have highlighted how feed productivity remains the key to farm profitability.
Dr Hauser said farmers need to focus on pasture management and achieving as much as possible from their resources to produce profit.
"Our analysis shows the importance of maximising feed production from your available land and water assets. The top 25 per cent of farmers are almost universally getting more feed per dollar invested," he said.
"We believe the industry should be focused on feed production per dollar of investment rather than a specific industry target for tonnes per hectare. Individual farm feed productivity will vary according to factors such as water availability and quality of land."
Mr Lane added that management of stocking rates, paddock rotation, and pasture residuals are the keys to success.
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"We're more likely to see wastage through under grazing in the spring and suppression of regrowth by overgrazing in the summer and winter - both result in a reduction in potential pasture harvest."
The research paper is the final chapter in a comprehensive industry economic review compiled by Dr Hauser and Mr Lane. The review examines Australian dairy industry's economic performance and provides a pathway to improve on-farm profitability.
Dr Hauser and Mr Lane based their research on the published Dairy Farm Monitor project data from 2006/07 to 2019/20. This comprises 1741 annual farm datasets from most Australian dairy regions. The analysis was carried out using Xcheque's OurFarm.app farm business software tools.
Mr Lane said the research re-confirmed the vital importance of true cost of feeding, including the capital cost of the land.
"The clear message is that farms give themselves the best chance of being profitable by lowering the cost of feed for per unit of production out the door," he said.
"Feed cost is about feed management. This is one of the most important things for farmers to focus on every day.
"If you're an intensive grazing system, good grazing management is critical - maximise quality growth and minimise wastage. Those running farm systems with a lot of supplementary feeding must think about how they provide that feed to cattle, maximise crop yields and minimise wastage during storage and feeding."
Dr Hauser said lower rainfall, summer temperatures, and more variable weather conditions made low cost pasture-based feed production more challenging in some parts of Australia.
"It is important to understand that Australia is not a 'one size fits all' dairy industry. Successful farmers adapt to the climate, the feed and water resource available to them, and the market they sell their milk into," he said.
"A good example of response to climate can be found in northern Victoria and southern NSW. Despite 20 years of extreme challenges in the availability and cost of water, these regions are still competitive places to supply the year-round demand for domestic fresh milk products"
Mr Lane said taking a multi-year approach to feed supply would help producers manage risk associated with low rainfall and seasonal variability.
"It's good to have buffers of feed and or water reserves to make sure you're not caught in tough conditions and forced into high-price markets," he said.
The wide-ranging study covered all aspects of dairy farm profitability. Farm profit has been summarised into five key profit drivers - what the authors call "profit fence posts": capital productivity, feed productivity, herd productivity, labour productivity, and price.
In addition to feed cost, the study found that labour productivity and milk price were the main factors that explain the difference in farm profitability across the industry.
Further case studies looking at individual farms are planned.
"Tracing strategy and performance in this way provides insight into how farmers adapt and optimise their farm operation for local conditions," Dr Hauser said.
The articles can be found at https://www.xcheque.com/articles.