Journal of the Department of Agriculture, Journal of the Department of Agriculture, Western Australia, Series 4 Western Australia, Series 4
Volume 41
Number 1 Journal of Agriculture, 1999/2000 Article 12
2000
Improving productivity with dairy farm performance Improving productivity with dairy farm performance
David Windsor
[email protected]
Ken Crawford Stuart Gallagher Vicki Staines
Follow this and additional works at: https://researchlibrary.agric.wa.gov.au/journal_agriculture4 Part of the Dairy Science Commons
Recommended Citation Recommended Citation
Windsor, David; Crawford, Ken; Gallagher, Stuart; and Staines, Vicki (2000) "Improving productivity with dairy farm performance," Journal of the Department of Agriculture, Western Australia, Series 4: Vol. 41: No. 1, Article 12.
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IMPROVING PRODUCTIVITY WITH DAIRY FARM PERFORMANCE
ctive can a dairy farm be? What options are available to dairy farmers to increase roductivity and profitability? How can you reduce milk production costs effectively?
These are the kinds of questions that dairy farmers are, or should be, asking leading up to and immediately after deregulation. These questions, and many more, can be answered by participating in Agriculture Western Australia's (AGWEST) Dairy Farm Performance (DFP) Program. David Windsor, Ken Crawford, Stuart Gallagher and Vicki Staines report on DFP and the benefits being generated for dairy farmers in Western Australia.
Dairy Farm Performance (DFP) was developed by Agriculture Western Australia to help Western Australian dairy farmers make better business decisions by giving them more reliable information about the physical and financial performance of their farms.
DFP assists farmers to compare their own performance from year to year, and benchmarks developed from the information allow them to assess their performance against other dairy farms. The system has been operating since 1992-93, which has allowed benchmarks to be developed over seven consecutive years.
Benchmarking with DFP
Benchmarks are an important output from DFP, and when used appropriately are very useful for farmers. However, it is important to
be clear about benchmarks, how they are derived, and how they are used. Benchmarking should be more about learning than comparison.
So what can farmers learn from benchmarks that are derived from DFP?
the
They can assess whether their farm performance is within the range achieved by the top 10 per cent of DFP farms for operating profit.
They can see where individual aspects of their farm performance fit in relation to these farms.
Benchmarks give some indication of the way the most profitable farms operate and the levels of some of their inputs.
The figures can be used as guides to indicate areas where improvements might be made on their farm.
DFP helps dairy farmers to assess both
the physical and financial performance
of their farms.
Examination ofDFP data collected between 1992-93 and 1998-99 clearly shows that milk production per hectare has a major impact on dairy gross margin. (Above)
T h e D F P b e n c h m a r k s are s i m p l y reference p o i n t s , and t h e y should n o t be regarded as targets o r 'recipes for success'. In addition, they are n o t averages. T h e y are, as stated, a range of figures for the t o p 10 p e r cent of farms w i t h the highest operating profit in any year.
U s i n g b e n c h m a r k s is a b o u t u n d e r s t a n d i n g m a n a g e m e n t p r o c e s s e s , a n d l e a r n i n g t o i m p r o v e performance and avoid repeating the mistakes m a d e by others. T h e three steps of t h e b e n c h m a r k i n g process are:
1. Identify t h e performance of the t o p 10 per cent in t h e industry, area o r defined section of the farm business t h r o u g h benchmarking.
2. Investigate and u n d e r s t a n d the management practices, including t e c h n o l o g y applied, on o t h e r f a r m s . T h i s m a y involve m a n y different m a n a g e m e n t systems and different technologies.
3. A d o p t , a n d if n e c e s s a r y a d a p t , t h e m a n a g e m e n t systems a n d technologies t o better suit t h e farm, the farm goals and the lifestyle t h e farm family is aiming for.
C a r e m u s t b e taken as these b e n c h m a r k s may n o t represent t h e industry leaders. O n l y those farmers w h o have chosen t o complete the D a i r y F a r m P e r f o r m a n c e d a t a i n p u t form for
any year are included in a n y b e n c h m a r k i n g assessment.
Having assessed a farm's performance against the benchmarks, a decision is m a d e as t o whether there are areas of t h e farm business that can be improved. Farmers then need t o find o u t h o w it is possible t o m a k e these i m p r o v e m e n t s . T h i s can be d o n e i n consultation w i t h farm advisers, t h e b a n k manager, milk c o m p a n y advisers o r d a i r y development officers at Agriculture W e s t e r n Australia. In addition, local discussion g r o u p s can assist with advice on m a n a g e m e n t issues.
D F P benchmarks and findings
Examination of D F P data collected b e t w e e n 1992-93 and 1998-99 clearly s h o w s t h a t milk p r o d u c t i o n p e r hectare is the m o s t i m p o r t a n t factor in determining dairy gross margin (the difference b e t w e e n variable i n c o m e a n d variable costs on a dollar-per-hectare basis).
A n o t h e r important factor is the a m o u n t of p a s t u r e used - either grazed b y c o w s o r conserved as hay or silage.
This is i m p o r t a n t for t w o reasons. Firstly, higher pasture use normally indicates a h i g h e r stocking rate and therefore higher p r o d u c t i o n per hectare. Secondly, pasture is a much cheaper feed dian grain or other concentrates. Maximising pasture-use helps reduce total feed costs.
T h e relationship between milk p r o d u c t i o n p e r hectare and pasture harvested p e r hectare is s h o w n in Figure 1. Milk p r o d u c t i o n t e n d s t o increase as pasture-use increases. This suggests that the most productive farms are successfully using m o r e pasture t o m a k e m o r e milk, rather than relying o n c o n c e n t r a t e s t o i n c r e a s e production. It also demonstrates achievable levels of p r o d u c t i o n performance.
As noted in Figure 1, the 40 highest gross margin herds almost all harvested m o r e t h a n four t o n n e s of p a s t u r e p e r h e c t a r e a n d produced m o r e than 5,000 litres of milk p e r hectare. O n l y three of t h e 40 lowest gross margin herds harvested m o r e than four t o n n e s of pasture p e r hectare, and n o n e p r o d u c e d 5,000 litres p e r hectare.
The majority of dairy farmers participating in D F P have increased p a s t u r e - u s e a n d milk p r o d u c t i o n p e r hectare, and n o w exceed b o t h these levels of performance. Farmers w h o s e p a s t u r e - u s e o r p r o d u c t i o n p e r h e c t a r e are
b e l o w these levels have an o p p o r t u n i t y to increase t h e i r p r o d u c t i v i t y , as i n d u s t r y experience i n d i c a t e s these b e n c h m a r k s are meaningful and achievable.
C h a n g i n g farm practices using D F P
Changing farm practices to reach p r o d u c t i o n targets is desirable, b u t can it be d o n e ?
C y r i l and Leslie Tucker of T u t t e m i p have increased t h e i r p a s t u r e - u s e a n d milk p r o d u c t i o n s i n c e a d o p t i n g t h e grazing management r e c o m m e n d a t i o n s developed by Agriculture Western Australia's 'Profit from Pastures' project (see Figure 2). A l t h o u g h milk p r o d u c t i o n p e r hectare almost doubled from 1993-94 t o 1997-98, i m p r o v e d pasture- use resulted in concentrate feeding increasing b y only some 25 p e r cent p e r cow. "We've learned a lot about how to manage pasture and grow grass in the last five years," says C y r i l .
D F P shows t h a t C y r i l and Leslie are not the o n l y farmers benefiting from 'Profit from P a s t u r e s ' . A v e r a g e p a s t u r e - u s e a n d milk p r o d u c t i o n p e r hectare have b o t h increased substantially since t h e project began in 1992-93 (see Figure 3). Average dairy o p e r a t i n g profit (net earnings b e f o r e interest a n d tax) for farmers completing D F P has also risen during this period.
Individual f a r m e r s are u s i n g p h y s i c a l and financial p e r f o r m a n c e information f r o m D F P t o improve their business decision-making.
Phil and Leanne D e p i a z z i farm t h e 80-hectare h o m e block near D a r d a n u p in p a r t n e r s h i p with Kevin and Belinda Depiazzi. Twenty-five hectares are irrigated, with t h e potential to irrigate another 16. T h e y milk a b o u t 200 cows a n d produce 1.7 million litres a year. T h e y use D F P to help find ways of i m p r o v i n g their business p e r f o r m a n c e . "DFP has given us a better understanding of our business and what costs are where," says Phil.
T h e Depiazzis' m a i n objective is for the farm t o support a comfortable lifestyle for three families (Phil's f a t h e r still c o n t r i b u t e s his l a b o u r t o t h e farm) w h i l e being environmentally sustainable. T h e i r focus used t o be on p r o d u c t i o n p e r cow. This has n o w shifted to p r o d u c t i o n per hectare and returns p e r hectare. D F P played a major role in highlighting areas t h a t needed a t t e n t i o n .
"We were feeding lots of concentrates and heading down the path of high inputs. DFP
I
• 40 highest Gross Margins (J/ha)
• 40 lowest Gross Margins (Via) 0 2,000 4.000 6.000 8,000 10.000 12000 14.000 16,000
Milk production (L/ha)
Figure 1 - This shows milk production per hectare and pasture harvested per hectare for DFP herds analysed between 1992-93 and 1998-99. Each dot represents a single year for an individual herd. Red dots represent the 40 herds with the highest gross margin ($/ha). Blue dots show the 40 lowest gross margins.
10
3 6
! py^i
2,000 4.000 8,000 8,000 10,000 12000 14000 16000 Milk production (Una)
Figure 2 - Change in pasture-use and milk production by C.R. and L.P. Tucker between 1993-94 and 1997-98. Dots represent individual herds, while the red line shows how the Tucker's pasture-use and milk production per hectare have increased due to increased stocking rate and improved grazing management between 1993-94 and 1997-98.
E
i 4 ,
I "
• Pasture harvested (t/tia) O M k production (x 1,000 Una)
u
1992-93 1993-94 1994-95 1995-96 1986-97 1997-!
Financial year
Figure 3 - Improvements in pasture harvested per hectare and milk production per hectare by Western Australian dairy farmers completing DFP between 1992-93 and 1997-98.
Grazing and conserving as much pasture as possible helps to minimise feed costs and maximise profit. (Above)
showed this was not the way for us to go. The main issue we are addressing now is to reduce inputs of concentrates and purchased fodder, and to feed more of what we are growing on our own place - lift our pasture-use." They are currently lasering and landforming part of the farm for irrigation so they can grow more grass.
Milk production has increased by more than 900 litres per hectare over the last four years, while the total quantity of milk produced increased by nearly 50 per cent. Jersey semen has been used to improve ease of calving in heifers, but is also having a positive influence on milk composition. To complement this, the Depiazzis have moved to a seasonal calving pattern, with 75 per cent of the herd calving in August/September and two smaller groups calving in summer and autumn.
"Batch calving is just easier to manage" says Phil. But all changes bring challenges. "DFP helps us measure our performance. When we started we didn't have much detail on our costs of production, either on the basis of cents per litre, dollars per calver or dollars per hectare.
DFP gives us this detail. We use it to help us make our business more profitable."
Norena Manning and son Graham share responsibility for the family farm near Harvey.
Norena does most of the paperwork and administration. Norena says they are looking for a quality lifestyle, as well as running the farm well (although getting Graham to take a holiday is not that easy). With deregulation around the corner, they are looking to milk more cows. Norena participates in D F P because "/ like to know what is going on. It is
hard to know what is going on without something like Dairy Farm Performance".
Norena says that there are three types of farmers. The complete theorists sit inside all day reading and doing sums. They know how things should be, but don't actually do much farming. Other 'practical' farmers spend all their time doing things and don't take the time to look at their business and see what is going on.
A third group manages to balance the practical and theoretical sides of farming. Norena is striving to have this balance on the farm. She does tend to do most of the 'theoretical' stuff and Graham does most of the 'practical' stuff, but they regularly get together to compare notes.
When Norena gets the DFP report, she usually goes straight to the return on investment and then looks at operating profit. Once she has satisfied her curiosity, she goes through the report and compares the figures between years.
She will usually go through the report with Graham, and they look where they can improve. "DFP is a good double check to see that the right things are really happening."
Graham and Jan Ravenhill of Narrikup, and sons Bevan and Ken have steadily increased their herd size from 80 cows in 1992-93 to almost 500 milkers in 2000. Collecting the necessary information for DFP has been an annual family event during this time. Like other participating farmers they use DFP to get an accurate picture of their business costs and the way in which the amount of money spent in specific areas changes from year to year.
The Ravenhills use information from DFP when preparing their annual budgets and for short- and long-term business planning. Grain consumption figures from DFP have played a key role in estimating each year's grain requirements when buying contract grain directly from local growers. Comparing the returns from their dairy and beef enterprises through DFP has influenced the rate at which their dairy herd has expanded and beef numbers have declined.
Lorelle and Don Fry farm 250 hectares near Benger. The Fry family faced significant challenges during the 1990s including the need for the farm to support two families and to plan for industry deregulation. They could see opportunities to increase their farm's
productivity but weren't quite sure how to act on them. "Our stocking rate was very low, drainage was poor and there was a lot of waterlogging," says Lorelle. " The figures from DFP gave us the ability and confidence
to act on our plans. We could see that the home block was under used and that a run- off block could be sold to fund our drainage program."
Don and Lorelle have since grown their herd by buying more dairying land and improving pasture management to increase stocking rate.
They now employ a herd manager and seasonal workers to supplement family labour.
Lorelle is enthusiastic about the benefits of DFP. "It has shown us how to increase our farm's efficiency. It shows us where our major costs are and helps in our negotiations with the bank. It's become a reference point for all our farm decisions."
Conclusions
The Dairy Farm Performance Program provides Western Australian dairy farmers with the information they need to analyse the physical and financial performance of their businesses, and to compare their performance with their industry peers.
Information collected through DFP also plays an important policy role within Agriculture Western Australia. "DFP helps us measure the impact that our research and extension activities have on the dairy industry" says Agriculture Western Australia Dairy Program Manager Geoff de Chaneet. "It also lets us look at what is restricting productivity and profitability on-farm, and to use that
information to target our efforts most effectively."
DFP is also helping farmers make better business decisions by identifying areas of the farm which are performing well, and highlighting opportunities for improvement.
DFP will be a valuable tool to increase farmer confidence in their business decisions as they respond to the challenges posed by industry deregulation.
Further reading
Mark Callow and Martin van Houtert (1999) Profit from Pastures. Journal of Agriculture Western Australia 40, 15-18.
