Rethinking your Dairy Business Profitability – What drives profit and which ratios to monitor?

Repensando la Rentabilidad de su Negocio Lechero – ¿Qué mueve las ganancias y cuáles índices controlar?

Presentation to 1st International Seminar – Ecuador, March 2019

“Designing Profitable Dairy Businesses for the Next Decade”

By David Beca

PRESENTATION OUTLINE

This presentation is based on a full statistical analysis of over 200 Australian farms where contributing farms were from a large range of production systems and from across the 5 main milk producing States, with all the data collected and processed in exactly the same way. This included data from Victoria, Tasmania, South Australia, Western Australia & southern New South Wales, with a significant amount of the data coming from industry-wide projects being run in Tasmania by DPIWE, South Australia by PIRSA and Western Australia by DAFWA.

All of the data was processed through Red Sky for the 20105/06 year, which was a year of sound (‘average’) milk prices and weather within reasonable norms. The contributing farmers utilised a wide range of farm production systems from almost ‘all’ pasture and under 4,000 litres per cow through to highly intensive production systems and over 9,000 litres per cow, resulting in this being a comparatively unbiased and unique dataset.

The presentation is a result of a comprehensive analysis of this dataset with the intent of identifying an essential group of ratios that farmers can use to determine how their business is performing and where changes could be made, including to their production system, if they wish to develop more profitable and sustainable dairy businesses. In addition, a number of commonly used ratios were identified as not being of value to farmers if their goal was improved profitability.

SUMMARY/CONCLUSIONS

The following points were developed in the presentation:

  • High pasture harvest is a critical aspect of dairy farm profitability and this is derived from high comparative stocking rates and management excellence.
  • Farm production system design must be targeted at a high profit margin and lowest cost of production for farmers to develop sustainable, internationally competitive businesses.
  • Farm production system design should be based around moderately sized cows that convert a large percentage of pasture in diet into moderate levels of milk production per cow and readily gets in calf.
  • A suite of 15-20 essential ratios should be monitored if high profitability and long-term sustainability is the desired outcome. Annual plans and budgets should be developed on the basis of improving these ratios, and then the goal of management is to execute accurately and fully on these plans.

To view the full presentation in English please click here.

Para ver la presentación completa en español, haga clic aquí.