International competitiveness of Missouri's optimal dairy farm system design

Abstract

Missouri is a state in America that has lost competitive advantage in milk production. With cow numbers continuing to decline, production per cow well behind leading diary areas, and only five herds greater than 500 head; Missouri is not a predominate dairy state. Yet, feed costs, land value, lower real estate taxes, location, and pasture growth have all been identified as potential sources of competitiveness for Missouri's dairy industry.

Beyond domestic competitiveness, globalization is coming to the forefront in American agriculture. The US dairy industry is feeling pressure from international competitors and global increase in dairy demand while world trade negotiations are beginning to make progress. These forces are putting US farms in a new playing field, in which they may not be designed to compete in.

The purpose of this study is to characterize an optimal dairy farm system design for Missouri, and then determine the competitiveness of that system against other land uses in Missouri as well as dairy farms across the United States and internationally. A linear programming model was developed and utilized to meet the purpose of this study. The model results suggest the optimal dairy farm system design for Missouri should have the following characteristics: • 803 cows • 566 hectare • 400 hectare grazed • 305 tonnes concentrate fed annually • Conventional freest all housing • Total mixed ration 10 months of year • Seasonal calving in Spring • 5.5 full time persons • $349,485 Net Revenue (pre-tax) • $8,649,000 Capital Investment • 4%RoA • 86.7% FWE as % GFI (incl. depreciation)

The optimal farm system was found to be competitive with current land uses in Missouri. It was also found to be competitive with dairy farms across different regions of the US. However, the optimal farm system would have to reduce cost of production significantly to become competitive internationally on a cost-leadership basis.