Kerry-born, New Zealand-based scientist John Roche of Animal Science was the keynote speaker at the Irish Grassland Association dairy conference.

Roche described the structure of New Zealand’s dairy industry to the 400 farmers and industry personnel in attendance and shared some insights that Irish dairy farmers might take on board as the post-quota era begins.

The New Zealand dairy industry has doubled in size in the last 20 years and now produces close to 20bn litres of milk. The biggest change Roche has witnessed in the past 10 years on New Zealand dairy farms is increasing feed costs in farm expenses.

He said that since 2006 milk prices have generally been increasing. Many farmers were making huge profits initially when prices began to rise but he believes with the extra cash they were taken in by companies with vested interests to purchase more inputs on the basis that more inputs will result in more milk and in turn more profit.

He said: “It is completely flawed thinking to say more milk will mean more profit.”

Roche explained that on average, feed expenses have increased from approximately 4c/kg milk to 7c/kg milk on New Zealand farms.

He gave the example of a dairy farm that expanded from 301 to 385 cows. He compared a rolling average of three years in 2002-2005 with 2009-2012, hence avoiding very bad and very good price years.

So what happened? Effectively that farmer increased his total milk solids production by 38% and increased milk revenue from €250,000 to €560,000. Farm size increased from 112ha to 138ha and stocking rate increased from 2.7 to 2.8 cows/ha. Operating profit increased from €51,000 to €120,000.

Roche said: “At first glance these figures seem to be a real success story and, you would think, point in favour of increasing production. However, we also need to look at what might happen if the same farmer did nothing in terms of expansion in those years and just accepted milk price and the inflationary increase in expenses.”

Roche estimated that the farmer would remain producing 90,000kg MS but operating profit would have increased from €41,000 to €131,000. Therefore, expansion only meant more work.

Roche said this is the situation for many New Zealand dairy farmers – more milk and not more profit.

He gave another good example of the common attitude among New Zealand farmers today regarding supplementation for cows. He was at a discussion group meeting and the host farmer displayed that his milk solids were average for the area but 400kg less per hectare than the top 10% of farmers in the region.

The farmers at the discussion group were quick to say he should increase his feeding rate to pump out more milk from cows.

However, when the financial performance was analysed, it showed the farmer was in the top 15% of farmers for generating profit.

Again, extra supplementation and more milk does not necessarily mean more profit.

Roche showed very clear figures on supplementation – for every 1t of supplement purchased, 1.2t less grass was utilised, which resulted in $910/ha (€600) less profit.

Roche said that for most Irish and British dairy farmers, 500kg of concentrates per cow per year is sustainable. “Expansion must be green,” he said.

He found that as dairy farmers in New Zealand got wealthy, some people became jealous and started to accuse farmers of causing pollution. Roche again alluded to vested interests that are pointing towards expensive housing and slurry storage as ways of improving their image and reducing possible pollution.

He believes dairy farmers are not the cause of pollution in New Zealand and new research shows that nitrate leaching is reduced by 15-20kg/ha as stocking rate increases once bought-in feed is not increased.

Opposition political parties are keen to see New Zealand dairy farming held to account more for the environmental impacts it can have.

Roche believes that if these parties come to power, agriculture could be hit with carbon taxes. This would result in many changes in the dairy industry.

Milk prices

Roche believes prices could be poor for the next two years.

“Prices have increased because the global economy was doing well, more people around the world are buying cheese and eating pizzas, which increased milk demand.”

The problem is production is too high at the moment, which is having the negative impact on price.

One of the closing points Roche made was an excerpt from an article printed in 1908 on an American dairy farmer. The author was bemused that those engaged in the production of milk didn’t look at their cost of production, producing milk at a higher cost than the return. Roche said that sentiment is as relevant today as it was 107 years ago.