AUSTRALIA-THE DAIRY INDUSTRY.
Before the recent dramatic cuts to milk prices, it was common belief that the Australian dairy industry was very profitable.
Yet the Australian Dairy Industry’s In Focus 2008 report, based on estimates from ABARE, indicates 44 per cent of farms had a negative business profit in 2007-08, down from 76 per cent in 2006-07.
In 1999-00, the national average production per cow was 4996 litres, in 2006-07 it was 5182 litres.
The average price received was about 30 cents a litre.
An increase of 186 litres at 30 cents a litre equals a gross increase over a seven year period of $55.80 a cow.
At $250 a tonne, farmers feeding 0.5 tonnes of grain for every cow in 2006-07 paid $125 in feed costs for an extra $55.80 gross return!
Where is the genetic gain and increased productivity farmers are continually investing hard earned dollars in?
Statistics verify no gain - only financial pain. Why?
The greater majority of dairy farmers’ systems and genetics are focused on gross income (production).
This system can only be profitable when returns are high and input costs low.
It is a rare combination - with the time spans being shorter.
Purchasing higher levels of inputs and creating higher levels of production in the "hope" of higher profit levels - is a recipe for financially unsustainable farming. All focus is on production (at any cost) and very little focus on costs of production (COP).
COP is the only major component of the profit equation a farmer can have any control over.
All "revolutionary" genetics and farming aides are "sold" as the solution to increasing profits.
In fact, they may supply the potential to increase gross income (totally different to profit).
The actual real direct and indirect associated costs are never accurately identified, quantified or allocated. They are modelled on a (US) system supported by heavily subsidised grain prices and cheap labour.
We have neither and are saturated in the genetics which evolved from this system. At great expense, farmers are attempting to create a production system around an incorrectly designed cow.
Profitable farming is only possible by farming an efficient cow in a profitable system.
The major problem? Accurate observation reveals when selection is production-based - using computer generated breeding values - the individuals "rising to the top" are taller, narrower and leaner than our traditional efficient performing individuals.
This body type brings a problem which is very expensive to "cater" for in any species - frailty.
Frailty equals high maintenance, poor fertility, poor longevity, low resistance to disease and great reliance on supplements, which equals high cost of production and low profit levels.
Add years of selecting (and marketing) promotable genetics versus profitable genetics (required by farmers) and the financial picture tells the story.
Everything is being looked at as the reason for lack of profit - except incorrect cow design.
The escalating frailty of the national cow herd has farmers on a very slippery financial slope - with no buffer for reduced income.
The modern dairy and beef cow only has to "hear" the mention of dry weather and they start losing weight.
The business of supplying supplements and aids for "modern" cattle has developed.
Their frailty makes them great consumers, playing perfectly into the hands of suppliers.
These products are great in theory, the only problem - they cost!
The "modern" black and white cow has the propensity to produce 12,000 litres in a "perfect" environment.
Yet the industry is achieving only around 6000-7000 litres.
Costs associated with the "big engine" do not disappear because production is below potential.
It is like having a five-litre V8 as a courier vehicle in the city for on the odd long run you will win while the constant cost of the big engine sitting at the lights will make you financially uncompetitive.
Farmers are continually working for their cows.
They require genetics which work for them. It’s time to look at your choices and why. Are you focused on production or profit?
Are you purchasing promotable paper or profitable paddock genetics?
If an animal does not look good it is no good, regardless of what the paper says. Efficiency of production is the key to sustainable profit generation. Correct genetic design is the key to efficient production.
