Back Economic Farm Survey results out

Date: 25 June 2014

Last month saw the release of the 2012-13 DairyNZ Economic Survey1. This fascinating document contains a wealth of data on the average physical and financial performance of 217 owner-operator and 92 50:50 sharemilker herds during the 2012-13 season. This year's survey is the 50th New Zealand Dairy Farm Economic Survey, the first being published by the New Zealand Dairy Board in 1963-64. It contains some interesting history as well as the 2012-13 season analysis.

According to the survey "Dairy farming in the mid-1960's was vastly different to the large-scale, capital intensive and high-technology farms of today. Typically, farms milked 75 Jersey cows on 58 hectares, through either an 8-bale walk-through shed or double-pit herringbone dairy. Milk was separated on-farm and cream stored in ‘cream cans'. Milk collection using tankers began in the late 1950's, and this led to a decline in dairy farmers raising pigs using skim milk. The use of milk tankers contributed to the amalgamation of factories as collection became more efficient, and milk could be transported longer distances1".

In the past 50 years, New Zealand dairy farm systems have intensified with more cows per hectare producing more milk per cow. In 2000-01, 41% of New Zealand dairy farms were System 1 (low input, grass based) and 12% were System 4 and 5 (20% or greater supplementary feed inputs)2. In 2012-13 only 5-10% of New Zealand dairy farms were System 1 and the number of System 4 and 5 farms had risen to 27-37%1.

An analysis of owner-operator data from the past three seasons shows that high input (System 4 and 5) farms produced more milk and gave a higher per hectare operating profit than low input (System 1 and 2) farms. During the past three seasons, high input systems had an average 12.7% return on equity vs 10.0% for low input systems.

Table 1: Owner-operator systems (DairyNZ Economic Survey data)3

For the full version of this table see www.dairynz.co.nz

During the next decade many farms will need to modify their management systems to meet Regional Council nitrogen leaching targets. There will essentially be three options (1) reduce stocking rate (2) keep the stocking rate up but stand cows off pasture and feed them supplements at critical times during the season or (3) a combination of both.

Some farmers believe they are between a "rock and a hard place" because they cannot afford to drop stocking rate or to move to a more intensive system that feeds more supplements. The DairyNZ Economic Farm Survey data is encouraging because it shows well managed higher input systems can be very profitable.

Ian Williams
Forage and Farm System Specialist