3 Physical Analysis
3.1 Introduction
The DairyNZ Economic Survey reports the trends in the financial performance of dairy farms but not all the trends in physical performance. While not presented, there are key physical indicators of milk production such as the days in milk, cow condition, reproductive performance, soil fertility, and fertiliser use data available in DairyBase®. It is the combination of the physical performance of the farm reflected through milksolids production, the cost of production and milk prices that drives the financial results. To find out more about the physical performance of dairy farms refer to New Zealand Dairy Statistics, available on the DairyNZ or LIC websites.
3.2 Rainfall Summary
NIWA supplies daily climate data for various points across New Zealand with their Virtual Climate Station Network. These data are collated into district-level averages for each month, weighted for areas where more farms are located. Within each region, median rainfall for the October to December (spring), January to March (summer), April to June (autumn) and July to September (winter) periods was calculated. The variation in the median regional rainfall from the thirty-year-weighted median is shown in Figure 3.1. See section 2.11 for an explanation of the median methodology used here. Overall, most regions had significantly wetter summers than the thirty-year weighted median, with only the West Coast - Top of the South and Otago - Southland regions experiencing less rain in summer than the long-term average.
3.3 Feed Use
Pasture and crop eaten, grazing off farm, and imported feed were estimated from the subsample of farms in DairyBase® that completed a physical analysis. Pasture and crop eaten marginally increased from 11.73 tDM/ha in 2021-22 to 11.82 tDM/ha in 2022-23, while the use of imported supplements decreased from 2.97 tDM/ha to 1.62 tDM/ha (Figure 3.2).
In 2022-23, of the total feed eaten per hectare, approximately 85 percent corresponded to pasture and crops eaten, 12 percent to imported supplements and 3 percent to grazing off. On average total feed eaten per hectare decreased in 2022-23 relative to 2021-22 and the 10-year average (15.2 tDM/ha).
3.4 Partial Productivity
Milk production per cow increased from last season while milk production per hectare decreased from last season (Figure 3.3 and 3.4, respectively). On the average dairy farm in the DairyNZ Economic Survey, milksolids sold per cow increased from 413 kg in 2021-22 to 418 kg in 2022-23. Milksolids sold per hectare decreased from 1,199 kg in 2021-22 to 1,174 kg in 2022-23.
The number of cows per FTE has decreased slightly in the last four seasons, from 147 cows per FTE in 2019-20 to 141 cows per FTE in 2022-23 (Figure 3.5).
3.5 Profit from Productivity
Productivity improvements over time are essential to sustain or grow business profits and compete successfully with alternative uses for resources. DairyNZ has developed a measure for productivity based on operating profits. Operating profit from productivity (PFP) is defined as the difference between actual operating profit and the operating profit that would have occurred with no productivity changes since a base year (i.e. in the absence of milksolids production increases and with operating expenses per kilogram of milksolids increasing annually at the rate of dairy farm input price inflation), see Figure 3.6. PFP is a measure of cost-efficient milksolids production increases since the base year, valued at the end of the year operating profit margin per kilogram of milksolids. It excludes the cost of capital, although depreciation and changes in hectares are accounted for. The three main contributory components of PFP are milksolids production increases since the base year, operating expenses savings in inflation-adjusted terms since the base year, and end-year operating profit per kilogram of milksolids (influenced by milk prices). DairyNZ and dairy farmers are increasingly focused on achieving cost-efficient milksolids production, and PFP provides a means for monitoring the value of productivity gains over time.
PFP decreased from $972 per hectare in 2021-22 to $833 in 2022-23 (1998-99 base year PFP = $0/ha). Figure 3.6 shows the gains made in PFP were relatively steady from 1990-91 to 2006-07. However, fluctuations in milk prices, seasonal rainfall and inflation have caused PFP to be more volatile since then.