Searching for productivity and competitive advantage on New Zealand dairy farms

Abstract

The New Zealand dairy industry is susceptible to volatile international prices, and depends on cost leadership at the farm level to maintain its international competitive advantage. The industry has accepted a target of 4% productivity improvement per annum. However, cost-based benchmarks of productivity are not used widely by farmers. It is argued that at the farm level, overall gains in resource efficiency need to be assessed in terms of cost per unit of output, and that these benchmarks need to be calculated in both cash and economic terms. These output-based cost benchmarks are tools both for assessing alternative technologies and for monitoring progress. However, they need to be used with discretion, and with recognition that strategic goals of increasing wealth through capital gain may on occasions take farmers in other directions.