Factors associated with profitability in pasture-based systems of milk production

Discipline: economics; Key words: dairy system, pasture-based milk production, cost control, profit  

Globally, pasture-based dairy systems are generally efficient and sustainable but have much scope for further improvement, especially through specific focus on technical efficiency and competitiveness. One area is increasing efficiency and profitability of the business by increasing output through increased pasture growth and use. However, this should be done within a framework of other affected and interacting factors. Therefore, the objective of the study by Dr L. Hanrahan and co-workers in Ireland was to quantify the factors associated with costs of production, profitability and pasture use, and the effects of pasture use on financial performance. Their study was published in the Journal of Dairy Science, Volume 101 of 2018, page 5474 to page 5485, the title being: Factors associated with profitability in pasture-based systems of milk production 

For this purpose they used an internationally recognized representative database over an 8-year period (2008 to 2015). To examine the associated effects of several farm system and management variables on specific performance measures, they developed a series of multiple regression models. Factors evaluated included pasture use [kg of dry matter/hectare and stocking rate (livestock units/hectare)], grazing season length, breeding season length, milk recording, herd size, dairy farm size, farmer age, discussion group membership, proportion of purchased feed, protein %, fat %, kg milk fat and protein per cow, kg milk fat and protein per hectare, and capital investment in machinery, livestock, and buildings. 

As expected, the regression analysis demonstrated costs of production per hectare differed by year, geographical location, soil type, level of pasture use, proportion of purchased feed, protein %, kg fat and protein per cow, dairy farm size, breeding season length, and capital investment in machinery, livestock, and buildings per cow. Nevertheless, the results of the analysis revealed that farm net profit per hectare was associated with pasture use per hectare, year, location, soil type, grazing season length, proportion of purchased feed, protein %, kg fat and protein per cow, dairy farm size, and capital investment in machinery and buildings per cow. Pasture use per hectare was associated with year, location, soil type, stocking rate, dairy farm size, fat %, protein %, kg fat and protein per cow, farmer age, capital investment in machinery and buildings per cow, breeding season length, and discussion group membership. On average, over the 8-year period, each additional tonne of pasture dry matter used increased gross profit by €278 and net profit by €173. Conversely, a 10% increase in the proportion of purchased feed in the diet resulted in a reduction in net profit per hectare by €97 and net profit by €207 per tonne of fat and protein.  

In conclusion, the relative large data set provided a strong argument for the benefits of focusing on several key performance metrics within pasture-based systems. Pasture use per hectare was demonstrated to be a crucial measurement of farm efficiency and a key performance indicator for benchmarking and determining proficiency levels within and across farms and across years. Some other key performance indicators in maximizing efficiency and profitability are also associated with pasture use. They include stocking rate, grazing season length and the proportion of purchased feed to supplement pasture use. Other key performance factors are associated with the milk that is produced, i.e. milk fat and protein production, and milk constituents. Efficient pasture-based milk production could be achieved by appropriately setting farm stocking rates to the pasture growing and use capabilities of the farm, while maintaining high levels of pasture management and stringent cost control. This will require record-keeping and decision-making through the use of pasture measurement and budgeting tools.