Evaluating development options for a rain-fed dairy farm in Gippsland

Abstract

A case study and modelling approach was used to examine options for a dairy farm in the high rainfall area of Gippsland (southern Victoria) that would enable it to maintain or increase profit in the future (next 5–10 years) in the face of a continuing ‘cost-price squeeze'. The economic performance of the business under a range of development options, identified by an ‘expert panel', was analysed for a planning period of 10 years. The options analysed were: (i) increased herd size without purchasing more land, (ii) increased milking area and (iii) purchasing non-milking area for production of conserved fodder. Expanding the milking area by purchasing more land without significantly increasing herd size (reducing stocking rate from 2.5 to 2.1 cows/ha) increased annual operating profit without increasing variability in profit between years compared with the base farm. The increased profit resulted from a reduction in the amount of purchased feed. The purchase of an additional outblock for fodder production reduced risk compared with the base farm system, but did not improve the profitability of the farm system. Other options significantly reduced profit while increasing risk. The most appropriate changes to dairy farm businesses in response to changes in the operating environment will vary from farm to farm. The analysis suggested that there may be an alternate path to the historical trends of larger and more intensive operations. It has also highlighted the importance of home-grown feed and efficient supplement use to increase or maintain profitability in the medium term.