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.