Roche and DairyNZ economist Matthew Newman spoke to farmers about whether they were making money from milk or milk from money at the DairyNZ Farmers’ Forum in Wallacetown on May 4.
Roche said farm profitability from increasing milk solids production was determined by the cost of the additional milk solids, not the average cost of all milk solids produced.
Marginal milk is the milk produced from bringing another feed source onto the platform or taking cows off the platform and feeding them with supplemental feed or off-farm grazing.
«The important thing is that as long as that marginal cost is below our milk price we’re making money … profit is maximised at the point our last kilo of milk solids costs us the same as our milk price. That’s where profit is maximised in any production system.»
Farmers did not have to be an economist to know if that if producing milk was costing more than the price of milk it was costing them money.
«In that case you’re paying for the privilege of producing milk», he said. «On average the marginal cost of milk produced from purchased supplement is approximately 150 per cent of the cost of the business.»
In essence, supplements should only be used when there was a genuine feed deficit, he said.
«The vast majority of farmers have been told for the past 15 years that the way to make money from supplements is that you push up your stocking rate, you bring in supplements.»
However, the marginal cost wa far higher because there was also the cost of the extra stock, he said.
Instead of listening to nutritionists when introducing feed into the farming system, farmers should be listening to their farm systems analysts because they needed to be using all of their pasture as well as the extra feed, he said.
Roche said it was important to account for all costs which changed when supplements were used to increase milk production, either through an increase in stocking rate or increased milk yield per cow.
Intensification is the increase of production from existing farm land. Newman said intensification meant more inputs, meaning more costs.
Cow numbers had increased 6.4 per cent the past 10 years, while stocking rates for the region had remained mostly steady, he said. Total milk solids had grown by seven per cent each year.
«We haven’t actually increased significantly the amount of feed going into cows, or if we have, worst case scenario is that we haven’t been very efficient with it.»
Pasture and their cost of production were the two areas farmers needed to concentrate on to be profitable, he said.
Source: Stuff
Link: http://www.stuff.co.nz/business/farming/dairy/92424613/marginal-milk–when-is-enough-too-much