Changing New Zealand dairy farm systems

Abstract

There have been dramatic changes in New Zealand dairy farm systems over the last decade. There is evidence that the basic grass dependant dairy farm systems are becoming more intensive with greater amounts of supplementary feed. Basic economic and business principles can explain why this shift is occurring. The study of elementary production economic principles which guide the development of a chosen farm system are explored in this paper.

New Zealand literature has examined different dairy production systems (Hedley, 2006; Newman, 2009) but few have ever done so from an economic imperative. All this literature has failed to mention that the key driver of profit and therefore the choice of farm system is dependent on relative prices i.e. the price of inputs (Px) vs. the milk price (Py). One element of the farm system debate is about high vs. low input. This debate has been part of the dairy industry for decades, both locally and overseas. In New Zealand researchers have concentrated on the scientific principles (animal nutrition and substitution rates) rather than the economic ones. The questions are essentially can farmers make more profit from higher (and sometimes more expensive) feed inputs, and what combination of feed inputs will achieve this, and what are the risks?