Pasture key to profitable off-peak production
Friday 08 March 2013 | From Dairy Australia
Off-peak milk production doesn’t necessarily mean intensive feeding, says a new study from Dairy Australia.
An analysis of Victorian dairy industry trends from 2006 to 2012 shows there has been a clear shift towards off-peak milk production over the past six years.
Many Victorian farms have increased off-peak production through adopting an intensive feeding system, yet a significant number have increased off-peak production by maintaining higher than 40% grazed pasture.
Dairy Australia’s Farm Business Management Program Manager, Gavin McClay, said the analysis explored the relationships between operating costs and operating margin and the level of off-peak milk produced.
“There was no significant correlation between operating cost and off-peak milk production, nor was there correlation between operating margin and off-peak milk production,” he said.
“The key driver for profit across farms with ranging milk supply patterns
was the percentage of directly grazed pasture.”
The report highlighted that farm operating cost falls and operating margins increase as the proportion of grazed pasture increases, Mr McClay said.
“Farms with more than 40% directly grazed pasture were more profitable and resilient through the last six years, farms with high feed inputs, lower levels of direct grazed pasture and flat milk supply patterns have the greatest amount of risk.
The study showed that a range of systems can be profitable but farmers need to be aware that these different systems have very different risk profiles which need to be considered for their situation,” he said.
Dairy Australia commissioned the report in response to significant interest from Victorian dairy farmers and key industry stakeholders around the impact of changes to milk supply patterns and their impact on farm profitability and risk.
The milk supply trends analysis focused on participants in the Victorian Dairy Industry Farm Monitor Project from 2006 to 2012. The impacts on cost of production and farm profit margins across a range of milk supply patterns from seasonal to all year-round were analysed.
Other key findings from the analysis included:
• In 2006/07, 50 % of farms in the sample produced off-peak milk (more than 40% of their milk supply from February to July).This increased to 76% of farms in 2009/10 and has remained stable since then.
• Increasing off-peak milk production does not guarantee a flat milk supply curve, but there is a correlation between off-peak milk and increased plant utilisation
• There has been a significant shift by medium to large farms from a seasonal supply pattern towards a flatter milk supply curve
• Farms producing less than 120,000 kgMS face potential challenges of higher cost of capital, higher labour and overhead costs and attract a lower milk price
• Milk pricing systems driving increased off-peak percentage and higher plant utilisation but with a ‘stepped’ structure can reduce the flexibility of farmers to respond appropriately to seasonal conditions
Dairy Australia plans to undertake similar milk supply trends analyses in New South Wales and Queensland.
For more information on this report please contact Dairy Australia Farm Business Management Program Manager, Gavin McClay: 03 9694 3829 or GMcClay@dairyaustralia.com.au
Dairy Australia is the national services body for the Australian dairy industry. The company acts as the collective investment arm of the industry, investing in essential research, development, extension and industry services.
Sue Webster — External Communications Manager, Dairy Australia
03 9694 3894
0402 267 802