Potential improvement in the performance of dairy farms in South Africa
Published in AGREKON: Agricultural Economics Research, Policy and Practice in Southern Africa
By David Beca
ABSTRACT
Over 2003 to 2021, the pasture harvested on South African pasture-based dairy farms increased markedly. This increased production and consumption of pasture has helped to reduce the cost of producing milk in South Africa relative to dairying in other countries and delivered comparatively high levels of profit. National milk production has grown steadily. Over this same time, pasture as a proportion of the total diet of dairy herds has decreased significantly: supplements make up the major share of the diet. This change to dairy herd diets puts upward pressure on the average cost of feeding the herd and on the cost of production. The focus of this paper is on whether dairy farmers would be better off if they significantly increased the proportion of pasture in the total diet of their herds and relied less on supplementary feed. It is shown that progressively increasing the pasture component and proportion in the diet of dairy herds, from an industry average of 41% to 57%, could increase profit. Results were a 26% increase in profit (return on capital), a 59% increase in profit margin per litre, and a 7% decrease in cost of production per litre. If this change in production system to increased use of pasture and less use of supplementary feeds was replicated across the entire South African pasture-based dairy industry, farmers in the industry would be significantly more profitable and their businesses would be more resilient than under the current feeding regimes that are used.
Extract from DISCUSSION
The impacts of changes in production systems, as outlined in this paper, demonstrate a potential opportunity for dairy farmers to reduce costs of production, increase margins on output, and increase whole farm profit. Reducing cost of production and increasing profit margin per litre provide an opportunity to increase the ability of dairy businesses to withstand increasing volatility in milk price, concentrate price, climate, or other factors.
These opportunities would appear to be equally relevant to farmers in several other countries that have followed a similar pathway to farmers in South Africa and substantially increased the proportion of supplement and decreased the percentage of pasture in the cows’ diet. Australia, Argentina, Uruguay, and United Kingdom are all examples of countries that have followed a similar pathway, although farmers in these other countries have not been able to increase pasture harvest to the extent achieved in South Africa, and they have experienced larger increases in costs of production.
Some thoughts...
In this paper two large dairy farm datasets are drawn on to calculate the economic impact of changes in pasture-based dairy production systems. The two datasets, one South African and the other Australian, are unique in that every set of individual farm data encompasses a comprehensive range of financial and physical data. The physical data includes complete energy calculations in megajoules of metabolisable energy which makes possible reconciled balances for milk, liveweight production, pasture and supplement intake. This does infer that the paper will also have direct applicability to dairy farm production systems in Australia and potentially be relevant to pasture-based production systems in all countries that utilise these systems.
To view and download the Accepted Manuscript please click here.
The actual paper was published by Taylor & Francis in AGREKON on 30-Dec-2022 and is available at: https://www.tandfonline.com/10.1080/03031853.2022.2127810.