Keep focus on marginal returns
August 10th, 2009
Dairy NZ economist Matthew Newman says farmers need to focus on the average cost of milk production and operating expenses per kg of milk solids as these are the best indicator of operating profit a hectare. Marginal return decisions are more important in determining profit than the volume of milksolids produced or the total cost in isolation.
Although milk prices have dropped dramatically since early 2008, most operating costs are still at high levels on top of which some pastures which need renewing after the summer 2008 drought have been further hit by the cold and wet winter in many regions. Farm working expenses (FWE) are forecast to drop back to around $3.30 in 2009-10 still 60c higher than 2006/07 Supplementary feed and grazing costs are forecast to be 25% of total FWE with wages (16%) and fertiliser (14%) the next biggest expenditure items.
In terms of pasture cover dairy NZ’s Rob Brazendale says ideally farmers should aim to get average pasture cover at calving to a minimum of 2100kgDM/ha. Many dairy farms are 200-300kgDM/ha below target average pasture cover. However, he notes before any strategies to improve pasture covers are considered, farmers first must understand their own farm situation. This means confirming the deficit and developing a plan on how to fill the deficit. Monitor pasture cover weekly.
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