Back Higher input systems are more profitable

Date: 23 July 2018

The data is clear – higher input systems are more profitable.

In the recently-released DairyNZ Economic Farm Survey and NZ Dairy Statistics, which surveyed the average physical and financial performance of 316 randomly-selected owner-operator herds across New Zealand during the 2016-17 production season, high input systems (those with more than 20% imported feed) were found to have the highest operating profit per hectare at $2,116.

Further to that, the long-term results of the survey over the past 12 seasons confirmed that on average, high input systems made more money ($1,994/ha), had the highest return on asset (6.23%) and also had the lowest closing term liability per kg/MS (23.43).

The survey data strengthened the case for the viability of high input farming systems, of which maize silage is an integral part.

For high input farms, feed other than pasture becomes a critical component of their success, so does feeding it at the lowest possible cost.

Pioneer maize silage is a high quality, low cost feed which is fast cementing its reputation as the best all-rounder supplementary feed available to New Zealand farmers.

And with palm kernel restrictions now coming into effect in the spring, maize silage will only play an increased role in high input systems.

Many successful high input farmers grow large amounts of maize silage on land they either own or lease, for around 15-20c kg/DM. They then use this low-cost feed to average down any higher priced, strategic supplements they may buy in.

The survey showed that over the last 12 years, on average, high input systems have made the most profit/ha, have had the best return on both assets and equity, have had the best growth in equity and are less financially risky in terms of their closing liabilities/kg milksolids.

For more information on adding more maize silage to your high input system, contact Pioneer on 0800 PIONEER (746 633).

Table 1: Owner-operators Production Systems 2016-17 season.

Farm System

Low

Medium

High

% feed imported

4-14% for dry cows

10-20% for dry cows & to extend lactation

More than 20% imported feed.

Effective area (ha)

128

152

163

Peak cows milked

322

427

481

Stocking rate (cows/ha)

2.5

2.8

2.9

Milksolids per ha

881

1,088

1,206

Milksolids per cow

349

387

409

Net dairy cash income ($/kgMS)

6.44

6.28

6.32

Dairy operating expenses ($/kgMS)

3.47

3.75

3.88

Cash operating surplus ($/kgMS)

2.97

2.53

 

2.44

Operating profit ($/ha)

1,771

1,816

2,116

Total return on assets (%)

11.5%

9.2%

9.3%

Total return on equity (%)

18.6%

15.0%

14.5%

Growth in equity (%)

18.6%

14.4%

15.2%

Closing term liabilities ($/kgMS)

24.80

25.38

23.43

Debt to asset (%)

46.0%

50.9%

49.2%

 Table 2: Average Profitability of Owner- Operator Production Systems from 2005-06 to 2016-17

Farm system

Low

Medium

High

Operating profit ($/ha)

1677

1812

1994

Total return on assets %

5.92

5.68

6.23

Total return on equity1 %

6.05

5.97

6.83

Growth in equity1 %

6.40

5.84

7.65

Closing term liability/kg milksolids2

24.80

25.28

23.43


1
Growth in equity and return on equity figures are from 2006-7 to 2016-17

2. For the 2016-17 season