Profit in dairy is not about chasing just one metric within the farm system.
It’s about making the best decisions based on the system you run, the resources you have, and the goals of your farm business.
It sounds simple, but it’s very easy to get pulled toward the wrong targets within the farm that don’t necessarily lead to greater profit.
In that scenario you’re working harder for someone else’s benefit. The key question is really: what’s the main limiting resource on your farm?
On most grazing dairy farms, profit is limited by the amount of cheap pasture produced and converted into milk solids.
Conversely, in confinement total mixed ration (TMR) systems, maximising milk production per cow via increased feed intake and greater feed conversion efficiency is a key aim due to the higher fixed costs in these systems.
For most pasture-based Australian dairy farms, land is usually the main limiting factor.
Accordingly, the focus needs to be on growing and utilising as much high-quality pasture per hectare as possible, then using supplements strategically to fill feed gaps and make money when the opportunity is there.
Directly grazed pasture is nearly always the cheapest feed source, so leaving pasture behind in the paddock through suboptimal grazing management and inefficient use of supplements is a massive hidden cost.
If extra supplement reduces pasture intake (via pasture substitution) and uneaten pasture is not conserved or utilised, the business may be paying to grow feed it never turns into milk.
This is why profit per hectare is often a better system measure for grazing farms than milk per cow.
Milk per cow is a biological measure, and a partial measure of performance within a grazing system, while profit per hectare is an economic and whole-farm measure.
On grazing farms, the aim is not always to get every last litre out of the cow at any cost.
It should be to produce the most profitable milk possible from the feedbase available.
It can be counterintuitive to grasp this concept but milk yield per cow has consistently been shown to have little to no relationship with total farm profit in grazing systems around the world.
This does not necessarily mean production per cow should not improve over time either.
Better genetics and fertility, improved transition management, better calf and heifer rearing, lower herd replacement rates and improved milk quality can all lift average milk yield per cow at a herd level. But these gains need to fit within the system, not push the farm into a higher cost structure that is more exposed to milk and feed price volatility.
That’s what underscores the importance of ‘marginal milk in grazing systems’.
In a pasture-based herd, each extra litre doesn’t cost the same to produce. The last litre per cow each day is usually the most expensive to produce – because of pasture substitution and increased fixed costs associated with higher supplement use.
Before chasing it, ask yourself whether the cost of producing that litre is higher or lower than the value it adds – this is marginal economics.
This will be influenced by the milk price and the supplement price, alongside several other factors.
As the old saying goes – make sure you are making money from milk not milk from money.
In contrast, a fully housed or total mixed ration system usually carries high capital and infrastructure costs, so production per cow becomes a critical driver.
The focus in a contained system is on maximising dry matter intake, feed conversion efficiency, cow comfort, feeding and lying space, and nutrition.
In that system, extracting more milk solids per cow helps dilute fixed costs.
There is no pasture substitution to worry about in a TMR system, and you also don’t have to worry about the negative effects of poor grazing residuals on pasture quality in the following rotations.
By comparison, partial mixed ration and hybrid systems sit in the middle, as they have both depreciation costs plus require pasture allocation.
The best dairy businesses are not necessarily the ones copying the highest-producing neighbour.
They’re the ones that understand their own system, know their limiting resource, and make decisions that fit.
In a complex farm business, improving one area can create costs or consequences somewhere else.
Good management is about seeing those links and choosing the option that improves whole farm profit.
By Ruairi McDonnell, Dairy Australia National Lead – Feedbase
