Intensified dairy switch no lightweight decision

The intensification of dairy farms by housing cows must be an informed investment decision based on clear goals and using the right tools for analysis, those in the industry in Mid Canterbury have been advised.

At Hinds last week, about 30 people attended DairyNZ's workshop which emphasised the need to make an informed decision when considering investing in off-paddock infrastructure such as covered feed pads or cow housing.

While there were any number of reasons for investing in such infrastructure, including achieving production or profit goals, reducing the impact of climatic conditions, meeting environmental targets and animal welfare, the decision to invest needed to be based on sound analysis of the business.

Geoff Taylor, DairyNZ project manager, people and business, said there were four questions farmers should answer when considering intensification: what are their goals and would intensification achieve them?, what is the financial impact?, does their team have the skills to manage? and, how does the risk profile change?

Farmers should question what was the real driver behind intensification. Was it to keep up with the neighbours?, was it to meet a new challenge? or was it stock performance?, Mr Taylor asked.

He presented information gained from case studies and research conducted by DairyNZ in the areas of environment, finance, management, and risk.

Intensification could have variable positive and negative implications for the environment and farmers needed to test each scenario, Mr Taylor said.

''You can't rely on what your neighbour is doing and think that you will get the same result.''

Analysis needed to be farm-specific.

Using the wrong tools could be misleading and lead to uninformed decisions, he said.

He urged them to value investment over time and said the best indicator of how equity would change over time was the net present value.

''It's not my job to tell you how to spend your money,'' he said.

''Sometimes it's not all about money.''

Farm owners had different values and motivations and the final decision might not maximise profit. Other considerations could include lifestyle, cow benefits, the farmer's own interests, or managing a perceived risk, such as environmental factors.

The level of management capability required to farm profitably increased with intensification, Mr Taylor said.

''As our systems intensify, the decisions get more complicated.''

- By Maureen Bishop 

The characteristics of good managers were that they were experienced in the industry, understood the levers in the business, were able to benchmark, plan and budget and monitor against the plan, network, operate in a decision-making team and understand their strengths and weaknesses.

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