USA’s housed dairying techniques offer lessons for NZ

Media Release

USA’s housed dairying techniques offer lessons for NZ farmers

28/11/2014

The high input housed dairying that makes up a major portion of USA output, provides valuable lessons for New Zealand farmers on managing the different components that go into these successful ventures, says Neil McAra, Crowe Horwarth Managing Principal - Southland.

Mr McAra, who recently took part in the GEA/ANZ delegation tour of farms in Wisconsin (a leading dairying state), said the visit drove home the need for New Zealand farmers to be clear on what they were trying to achieve through their capital expenditure programmes.

“New Zealand farmers need to be aware of how their international competitiveness stacks up against countries like the US, because their farmers are using mega farms, with 2000-plus cows, to sell into the same markets that we do,” he said.

These mega farms are competitive due to:

• Scale – they account for 40 per cent of the US dairy supply

• Precision agriculture – right inputs, right place, right amounts, right time

• Use of state-of-the-art technology

• Accesses to cheap labour – 90 per cent of employees are Hispanic and earn NZ$11.40-$15.90 per hour

• Lower capital expense – US farmland is half the price of New Zealand’s

• Utilising systems to suit environmental and economic conditions – the majority of mega farms use housed systems

“Because New Zealand land cost is such a huge factor for farmers here, it’s imperative to consider the return on investment of capital expenditure such as irrigation systems, feed pads, herd homes and automated milking systems,” said Mr McAra.

Other important factors to consider before making the decision to invest, are skill requirements, setting realistic production budgets and the impact on environmental management, he said.

Generally, New Zealand should be looking to combat the threat from US and others by:

• Continuing to use innovation and precision agriculture to drive productivity

• Up-skilling employees and providing strong leadership

• Adapting systems to economically manage environmental aspects

• Consolidation of farms

However, Mr McAra cautioned that poorly managed high input systems generated less cash than poorly managed low input systems. Dairy NZ Research has shown that less than five per cent of farmers are able to profitably operate highly intensive systems.

A strong focus on operating profit was key to farm success, he said. Low operating costs per kg/MS (milk solids) combined with high production/ha led to increases in operating profit.

“As a general rule of thumb, it takes 1kgDM (dry matter) to produce 1 litre of milk, so it’s essential to choose the cheapest, most efficient feed, especially in a low pay-out year when, based on the current milk price forecast, farmers will only receive 45c/L.”

ENDS

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