Competitive Position of the Competitive Position of the

Tasmanian Dairy Industry Tasmanian Dairy Industry

-Farmers Key to Success--Farmers Key to Success-

David Beca – Red Sky Agricultural Pty LtdDavid Beca – Red Sky Agricultural Pty Ltd

AgendaAgenda

Background to dataBackground to data

How Tassie comparesHow Tassie compares

Profit drivers in pasture-based dairyingProfit drivers in pasture-based dairying

Opportunities for Tassie DairyOpportunities for Tassie Dairy

Finalists from TassieFinalists from Tassie

““Cleaning up” at the awardsCleaning up” at the awards

How do “the winners” do itHow do “the winners” do it

Database ContentDatabase Content Comparisons provided across Aus & NZComparisons provided across Aus & NZ

Strong data integrityStrong data integrity

Similar bias across all data groupsSimilar bias across all data groups

There have been no statistics completed on There have been no statistics completed on

individual data setsindividual data sets

Some of presentation based on queries of the Some of presentation based on queries of the

Australia-wide Red Sky databaseAustralia-wide Red Sky database

286 sets of data for 2005/06286 sets of data for 2005/06

Data across 5 statesData across 5 states

Wide range of farm systemsWide range of farm systems

Processed by Red Sky or rural professionalsProcessed by Red Sky or rural professionals

Return on AssetsReturn on Assets

Tas-Tas-maniamania

South South West West VICVIC

Gipps- Gipps- land land VICVIC

North North Irr’n Irr’n VICVIC

West West AusAus

South South AusAus

New New Zea-Zea-landland

2006 2006 AvgAvg 6.8%6.8% 6.8%6.8% 6.3%6.3% 6.2%6.2% 2.4%2.4% 3.4%3.4% 2.0%2.0%

2007 2007 AvgAvg 4.4%4.4% 2.1%2.1% 2.4%2.4% -1.0%-1.0% 2.0%2.0% -0.6%-0.6% 2.3%2.3%

2006 2006 T10%T10% 13.0%13.0% 12.4%12.4% 12.7%12.7% 11.7%11.7% 4.5%4.5% 7.8%7.8% 5.1%5.1%

2007 2007 T10%T10% 8.5%8.5% 6.9%6.9% 7.3%7.3% 4.6%4.6% 4.8%4.8% 5.3%5.3% 5.0%5.0%

Profit per HectareProfit per Hectare

Tas-Tas-maniamania

South South West West VICVIC

Gipps- Gipps- land land VICVIC

North North Irr’n Irr’n VICVIC

West West AusAus

South South AusAus

New New Zea-Zea-

land**land**

2006 2006 AvgAvg $ 1045$ 1045 $ 917$ 917 $ 1176$ 1176 $ 1169$ 1169 $ 382$ 382 $ 447$ 447 $ 621$ 621

2007 2007 AvgAvg $ 800$ 800 $ 301$ 301 $ 484$ 484 -$ 330-$ 330 $ 369$ 369 -$ 211-$ 211 $ 949$ 949

2006 2006 T10%T10% $ 2059$ 2059 $ 1771$ 1771 $ 2204$ 2204 $ 2377$ 2377 $ 718$ 718 $ 1484$ 1484 $ 1701$ 1701

2007 2007 T10%T10% $ 1594$ 1594 $ 1142$ 1142 $ 1489$ 1489 $ 965$ 965 $ 920$ 920 $ 996$ 996 $ 2171$ 2171

** AU$ based on AU$1.00 = NZ$1.12** AU$ based on AU$1.00 = NZ$1.12

Milk PriceMilk Price

Tas-Tas-maniamania

South South West West VICVIC

Gipps- Gipps- land land VICVIC

North North Irr’n Irr’n VICVIC

West West AusAus

South South AusAus

New New Zea-Zea-

land**land**

2006 2006 AvgAvg

35.13 35.13

$4.45$4.45

33.06 33.06

$4.42$4.42

33.42 33.42

$4.42$4.42

33.70 33.70

$4.40$4.40

26.87 26.87

$3.77$3.77

32.80 32.80

$4.65$4.65

31.08 31.08

$3.66$3.66

2007 2007 AvgAvg

35.09 35.09

$4.44$4.44

32.24 32.24

$4.27$4.27

32.30 32.30

$4.29$4.29

32.32 32.32

$4.23$4.23

31.49 31.49

$4.47$4.47

32.49 32.49

$4.55$4.55

33.88 33.88

$3.98$3.98

2006 2006 T10%T10%

36.59 36.59

$4.64$4.64

32.01 32.01

$4.44$4.44

33.33 33.33

$4.48$4.48

33.83 33.83

$4.47$4.47

28.13 28.13

$3.93$3.93

34.39 34.39

$4.62$4.62

31.04 31.04

$3.66$3.66

2007 2007 T10%T10%

36.64 36.64

$4.43$4.43

31.57 31.57

$4.29$4.29

32.20 32.20

$4.34$4.34

32.60 32.60

$4.29$4.29

33.15 33.15

$4.79$4.79

32.79 32.79

$4.64$4.64

33.69 33.69

$3.98$3.98

** AU$ based on AU$1.00 = NZ$1.12** AU$ based on AU$1.00 = NZ$1.12

Cost of Production (c/l)Cost of Production (c/l)

Tas-Tas-maniamania

South South West West VICVIC

Gipps- Gipps- land land VICVIC

North North Irr’n Irr’n VICVIC

West West AusAus

South South AusAus

New New Zea-Zea-land*land*

2006 2006 AvgAvg 26.126.1 24.824.8 24.324.3 26.826.8 23.923.9 29.629.6 26.226.2

2007 2007 AvgAvg 28.428.4 29.629.6 28.728.7 34.234.2 28.628.6 34.234.2 26.326.3

2006 2006 T10%T10% 23.523.5 19.819.8 20.220.2 23.323.3 21.721.7 26.526.5 20.620.6

2007 2007 T10%T10% 26.126.1 23.623.6 23.523.5 28.328.3 27.327.3 28.028.0 20.520.5

* AU$ based on AU$1.00 = NZ$1.12* AU$ based on AU$1.00 = NZ$1.12

Cost of Production ($/kgMS)Cost of Production ($/kgMS)

Tas-Tas-maniamania

South South West West VICVIC

Gipps- Gipps- land land VICVIC

North North Irr’n Irr’n VICVIC

West West AusAus

South South AusAus

New New Zea-Zea-land*land*

2006 2006 AvgAvg $ 3.30$ 3.30 $ 3.31$ 3.31 $ 3.22$ 3.22 $ 3.51$ 3.51 $ 3.36$ 3.36 $ 4.20$ 4.20 $ 3.08$ 3.08

2007 2007 AvgAvg $ 3.60$ 3.60 $ 3.92$ 3.92 $ 3.81$ 3.81 $ 4.48$ 4.48 $ 4.06$ 4.06 $ 4.79$ 4.79 $ 3.10$ 3.10

2006 2006 T10%T10% $ 2.98$ 2.98 $ 2.74$ 2.74 $ 2.72$ 2.72 $ 3.08$ 3.08 $ 3.05$ 3.05 $ 3.56$ 3.56 $ 2.43$ 2.43

2007 2007 T10%T10% $ 3.16$ 3.16 $ 3.21$ 3.21 $ 3.17$ 3.17 $ 3.72$ 3.72 $ 3.94$ 3.94 $ 3.96$ 3.96 $ 2.52$ 2.52

* AU$ based on AU$1.00 = NZ$1.12* AU$ based on AU$1.00 = NZ$1.12

Pasture Harvest - DrylandPasture Harvest - Dryland

Tas-Tas-maniamania

South South West West VICVIC

Gipps- Gipps- land land VICVIC

North North Irr’n Irr’n VICVIC

West West AusAus

South South AusAus

New New Zea-Zea-landland

2006 2006 AvgAvg 9.19.1 6.46.4 7.47.4 2.52.5 5.15.1 4.54.5 11.511.5

2007 2007 AvgAvg 8.78.7 5.95.9 7.47.4 1.91.9 5.25.2 3.83.8 11.611.6

2006 2006 T10%T10% 11.111.1 7.87.8 9.39.3 3.13.1 5.35.3 5.55.5 13.913.9

2007 2007 T10%T10% 11.111.1 7.37.3 9.19.1 2.72.7 5.95.9 4.24.2 14.214.2

Pasture Harvest - IrrigatedPasture Harvest - Irrigated

Tas-Tas-maniamania

South South West West VICVIC

Gipps- Gipps- land land VICVIC

North North Irr’n Irr’n VICVIC

West West AusAus

South South AusAus

New New Zea-Zea-landland

2006 2006 AvgAvg 11.711.7 10.910.9 11.911.9 9.29.2 8.38.3 10.610.6 16.116.1

2007 2007 AvgAvg 12.512.5 10.110.1 9.99.9 7.47.4 9.79.7 7.47.4 16.316.3

2006 2006 T10%T10% 12.512.5 13.313.3 14.814.8 11.511.5 8.78.7 12.212.2 17.317.3

2007 2007 T10%T10% 15.815.8 12.412.4 12.312.3 10.610.6 11.011.0 10.910.9 17.717.7

Tassie’s ScorecardTassie’s Scorecard

Strengths:Strengths: Pasture harvest (& stocking rate)Pasture harvest (& stocking rate) Labour efficiencyLabour efficiency Core per cow costsCore per cow costs

Competitive:Competitive: Milk per hectareMilk per hectare Forage cost (low use)Forage cost (low use) Core per hectare costsCore per hectare costs

Less Competitive:Less Competitive: Milk per cowMilk per cow Concentrate Cost (due to locality)Concentrate Cost (due to locality)

Hypothesis No.1Hypothesis No.1

Milk production per cow is a primary driver of Milk production per cow is a primary driver of

profitability in pasture-based dairyingprofitability in pasture-based dairying

Given cows need a set amount of energy for Given cows need a set amount of energy for

maintenance…if we can feed them better then maintenance…if we can feed them better then

more energy will go into milk production which more energy will go into milk production which

must be more efficientmust be more efficient

Tasmanians & New Zealanders have been Tasmanians & New Zealanders have been

chastised over their low level of milk chastised over their low level of milk

production per cow for many years…well…production per cow for many years…well…

ROA vs Litres per CowROA vs Litres per Cow

ROA vs Milksolids per CowROA vs Milksolids per Cow

COP per kgMS vs Litres per CowCOP per kgMS vs Litres per Cow

COP per Litre vs Litres per CowCOP per Litre vs Litres per Cow

Labour Efficiency vs Litres per CowLabour Efficiency vs Litres per Cow

Core per Cow Cost vs Litres per CowCore per Cow Cost vs Litres per Cow

ConclusionConclusion

Given cows need a set amount of energy for Given cows need a set amount of energy for

maintenance…if we can feed them better then maintenance…if we can feed them better then

more energy will go into milk production which more energy will go into milk production which

must be more efficientmust be more efficient

There is not a positive correlation between milk There is not a positive correlation between milk

production per cow and profitproduction per cow and profit

So more milk per cow in itself will just as likely So more milk per cow in itself will just as likely

lose money as make moneylose money as make money

To make more money from more milk per cow, To make more money from more milk per cow,

the critical components to master are the critical components to master are pasture pasture

harvestharvest, , labour efficiencylabour efficiency and and core per cow costscore per cow costs

Hypothesis No.2Hypothesis No.2

With the high cost of land and/or water it will be With the high cost of land and/or water it will be

important to generate more revenue from important to generate more revenue from

this…so more supplementation and use of high this…so more supplementation and use of high

yielding cropsyielding crops

Would irrigation water be better utilised on Would irrigation water be better utilised on

much higher yielding crops than ryegrass?much higher yielding crops than ryegrass?

Substantial lifts in stocking rate along with Substantial lifts in stocking rate along with

higher yields per cow have the potential to higher yields per cow have the potential to

produce dramatically more milk per hectareproduce dramatically more milk per hectare

One impact is that pasture decreases as a One impact is that pasture decreases as a

percentage of dietpercentage of diet

ROA vs % Pasture in DietROA vs % Pasture in Diet

COP per kgMS vs % Pasture in DietCOP per kgMS vs % Pasture in Diet

Pasture Harvest vs % Pasture in DietPasture Harvest vs % Pasture in Diet

Core per Cow Cost vs % Pasture in DietCore per Cow Cost vs % Pasture in Diet

ConclusionConclusion

With the high cost of land and/or water it will be With the high cost of land and/or water it will be

important to generate more revenue from important to generate more revenue from

this…so more supplementation and use of high this…so more supplementation and use of high

yielding cropsyielding crops

There is not a positive correlation between There is not a positive correlation between

increasing supplement use and profitincreasing supplement use and profit

So increasing supplement use in itself will just So increasing supplement use in itself will just

as likely lose money as make moneyas likely lose money as make money

To make more money from higher supplement To make more money from higher supplement

use, the critical components to master are use, the critical components to master are

pasture harvestpasture harvest and and core per cow costscore per cow costs

Hypothesis No.3Hypothesis No.3

Stocking rate is a primary driver of Stocking rate is a primary driver of

profitability in pasture-based dairyingprofitability in pasture-based dairying

Given milk per cow does not appear to be a Given milk per cow does not appear to be a

primary driver then stocking rate had better primary driver then stocking rate had better

be…or are we not in the business of producing be…or are we not in the business of producing

milk?milk?

And if stocking rate is a primary driver then is And if stocking rate is a primary driver then is

there a ‘right’ stocking rate or is it just that there a ‘right’ stocking rate or is it just that

‘higher is better’‘higher is better’

ROA vs Stocking RateROA vs Stocking Rate

COP per kgMS vs Stocking RateCOP per kgMS vs Stocking Rate

Pasture Harvest vs Stocking RatePasture Harvest vs Stocking Rate

ConclusionConclusion

Given milk per cow does not appear to be a Given milk per cow does not appear to be a

primary driver then stocking rate had better primary driver then stocking rate had better

be…or are we not in the business of producing be…or are we not in the business of producing

milk?milk?

Stocking rate does positively correlate with Stocking rate does positively correlate with

profitabilityprofitability

The link to pasture harvest appears criticalThe link to pasture harvest appears critical

Potentially a ‘sweet spot’ that optimises profit Potentially a ‘sweet spot’ that optimises profit

depending on productive capacity of landdepending on productive capacity of land

Hypothesis No.4Hypothesis No.4

Pasture is the primary driver of pasture-based Pasture is the primary driver of pasture-based

dairying profitabilitydairying profitability

Is more pasture simply better for business?Is more pasture simply better for business?

Where does it rate compared to alternative Where does it rate compared to alternative

feeds and farming systems?feeds and farming systems?

ROA vs Pasture HarvestROA vs Pasture Harvest

COP per kgMS vs Pasture HarvestCOP per kgMS vs Pasture Harvest

Labour Efficiency vs Pasture HarvestLabour Efficiency vs Pasture Harvest

SummarySummary Pasture IS Pasture IS the primary driver of profitabilitythe primary driver of profitability

IF increases in milk production per hectare IF increases in milk production per hectare

result in more profit then stocking rate is result in more profit then stocking rate is

likely to be the primary driverlikely to be the primary driver

To make more money from more milk and To make more money from more milk and

supplements, the critical components to supplements, the critical components to

master are master are pasture harvestpasture harvest, , labour efficiencylabour efficiency

and and core per cow costscore per cow costs

Maintaining a low cost of production is at the Maintaining a low cost of production is at the

heart of our international competitiveness – heart of our international competitiveness –

we lose this at our perilwe lose this at our peril

The Opportunity in TassieThe Opportunity in Tassie

To keep improving in the areas of strengthTo keep improving in the areas of strength

To further increase performance in the To further increase performance in the

areas of:areas of:

Pasture harvestPasture harvest

Stocking rate (more milk per ha)Stocking rate (more milk per ha)

Labour efficiencyLabour efficiency

Core per cow costsCore per cow costs

Lower cost of productionLower cost of production

And the winners were…And the winners were…

Sharefarmer;Sharefarmer; Wayne & Angela Huisman Wayne & Angela Huisman

Irrigated;Irrigated; Paul & Nadine Lambert Paul & Nadine Lambert

Low Concentrate;Low Concentrate; Paul & Nadine Lambert Paul & Nadine Lambert

Medium Concentrate;Medium Concentrate; Stephen & Karen Stephen & Karen

FisherFisher

Tasmania;Tasmania; Stephen & Karen Fisher Stephen & Karen Fisher

Supreme (dryland);Supreme (dryland); Stephen & Karen Fisher Stephen & Karen Fisher

Trans-Tasman;Trans-Tasman; Stephen & Karen Fisher Stephen & Karen Fisher

Tassie FinalistsTassie Finalists

ROCROC Profit Profit per Haper Ha

Cost of Cost of Prod’nProd’n

Milk Milk Prod’n -Prod’n -MS/haMS/ha

Pasture Pasture Harvest Harvest –DM/ha–DM/ha

Labour Labour Effic-Effic-iencyiency

Core Core per Cow per Cow

CostCost

FisherFisher 9.7%9.7% $2,011$2,011 $3.14$3.14 1,3521,352 12.612.6 168168 $430$430

LambertLambert 9.5%9.5% $2,719$2,719 $3.02$3.02 1,6821,682 15.415.4 125125 $361$361

Huisman Huisman & Camp-& Camp-

bellbell9.1%9.1% $1,853$1,853 $3.14$3.14 1,5051,505 13.313.3 156156 $409$409

Huisman Huisman (Sharef)(Sharef) 13.6%13.6% $710$710 $1.69$1.69 1,5051,505 13.313.3 156156 $232$232

RogersRogers 8.8%8.8% $1,630$1,630 $3.03$3.03 1,1261,126 12.612.6 135135 $308$308

So how do you do it…So how do you do it… Farming philosophy summarised in a few wordsFarming philosophy summarised in a few words

How do you judge successHow do you judge success

Thoughts on the following:Thoughts on the following:

Milk productionMilk production

Stocking rateStocking rate

Pasture productionPasture production

Feed purchasingFeed purchasing

Labour efficiencyLabour efficiency

Cost controlCost control

Where to from here…Where to from here…

Tasmania DairyTasmania Dairy

www.redskyagri.comwww.redskyagri.com