Evolution of dairy production systems in leading exporting countries plus South Africa…and what can be forecast for the next 5 years
Presentation to Dairy Seminar – KwaZulu-Natal, South Africa, October 2019
By David Beca
Seminar theme: “If increasing pasture harvest has been the key strategy to improvements in profitability over the last 15-20 years, what will be the key strategy for the next 10 years?”
This presentation covers the following areas:
An initial review of growth in annual milk supply shows that the New Zealand, South African and United States dairy industries have all been consistently growing over the last 17 years, while the Australian, Argentinian and Uruguayan industries have all stopped growing at some point.
When milk price is reviewed over this period, it is clear that this has not been a relevant factor for the absence of growth in Australia, Argentina & Uruguay. Much larger increases in cost of production in these countries is identified as the problem, and the presentation reviews a broad selection of ratios to identify in more detail what has been behind this.
Changes to farm production systems are the major factor behind the increases in cost of production, with Australia, Argentina & Uruguay significantly reducing the percentage of pasture in the cows’ diet, which has been associated with higher levels of concentrate being fed per cow and a move to larger US-type cows. This has left these 3 countries with low levels of dairy farm profitability, to the extent that on average they no longer have comparative advantage to other land uses within their countries and nor are they internationally competitive.
The inclusion of United States in these comparisons provides a range of insights, from what the impact is of adopting US production systems on a full range of economic indicators, to highlighting the “elephant in the room” impact from huge increases in their export milk volumes.
The comparisons between New Zealand as the leading low cost of production industry and United States as the most ‘biologically efficient’ industry provides insights into what the key business principles are that can be adopted by other industries like South Africa. The presentation identifies a concerning trend in South Africa to reduce the percentage of pasture in the cows’ diet, and outlines what all pasture-based countries will need to do to sustain sound levels of profitability and growth.
To view a selection of slides from the presentation in English/US number format please click here.
To view a selection of slides from the presentation in South African/Spanish number format please click here.