1. Competitive Position of the Tasmanian Dairy Industry -Farmers Key to Success- David Beca – Red Sky Agricultural Pty Ltd

2. Agenda  Background to data  How Tassie compares  Profit drivers in pasture-based dairying  Opportunities for Tassie Dairy  Finalists from Tassie  “Cleaning up” at the awards  How do “the winners” do it

3. Database Content  Comparisons provided across Aus & NZ  Strong data integrity  Similar bias across all data groups  There have been no statistics completed on individual data sets  Some of presentation based on queries of the Australia-wide Red Sky database  286 sets of data for 2005/06  Data across 5 states  Wide range of farm systems  Processed by Red Sky or rural professionals

4. Return on Assets Tas- mania South West VIC Gipps- land VIC North Irr’n VIC West Aus South Aus New Zea- land 2006 Avg 6.8%6.8%6.3%6.2%2.4%3.4%2.0% 2007 Avg 4.4%2.1%2.4%-1.0%2.0%-0.6%2.3% 2006 T10% 13.0%12.4%12.7%11.7%4.5%7.8%5.1% 2007 T10% 8.5%6.9%7.3%4.6%4.8%5.3%5.0%

5. Profit per Hectare Tas- mania South West VIC Gipps- land VIC North Irr’n VIC West Aus South Aus New Zea- land** 2006 Avg $ 1045 $ 917 $ 1176 $ 1169 $ 382 $ 447 $ 621 2007 Avg $ 800 $ 301 $ 484 -$ 330 $ 369 -$ 211 $ 949 2006 T10% $ 2059 $ 1771 $ 2204 $ 2377 $ 718 $ 1484 $ 1701 2007 T10% $ 1594 $ 1142 $ 1489 $ 965 $ 920 $ 996 $ 2171 ** AU$ based on AU$1.00 = NZ$1.12

6. Milk Price Tas- mania South West VIC Gipps- land VIC North Irr’n VIC West Aus South Aus New Zea- land** 2006 Avg 35.13 $4.45 33.06 $4.42 33.42 $4.42 33.70 $4.40 26.87 $3.77 32.80 $4.65 31.08 $3.66 2007 Avg 35.09 $4.44 32.24 $4.27 32.30 $4.29 32.32 $4.23 31.49 $4.47 32.49 $4.55 33.88 $3.98 2006 T10% 36.59 $4.64 32.01 $4.44 33.33 $4.48 33.83 $4.47 28.13 $3.93 34.39 $4.62 31.04 $3.66 2007 T10% 36.64 $4.43 31.57 $4.29 32.20 $4.34 32.60 $4.29 33.15 $4.79 32.79 $4.64 33.69 $3.98 ** AU$ based on AU$1.00 = NZ$1.12

7. Cost of Production (c/l) Tas- mania South West VIC Gipps- land VIC North Irr’n VIC West Aus South Aus New Zea- land* 2006 Avg 26.124.824.326.823.929.626.2 2007 Avg 28.429.628.734.228.634.226.3 2006 T10% 23.519.820.223.321.726.520.6 2007 T10% 26.123.623.528.327.328.020.5 * AU$ based on AU$1.00 = NZ$1.12

8. Cost of Production ($/kgMS) Tas- mania South West VIC Gipps- land VIC North Irr’n VIC West Aus South Aus New Zea- land* 2006 Avg $ 3.30 $ 3.31 $ 3.22 $ 3.51 $ 3.36 $ 4.20 $ 3.08 2007 Avg $ 3.60 $ 3.92 $ 3.81 $ 4.48 $ 4.06 $ 4.79 $ 3.10 2006 T10% $ 2.98 $ 2.74 $ 2.72 $ 3.08 $ 3.05 $ 3.56 $ 2.43 2007 T10% $ 3.16 $ 3.21 $ 3.17 $ 3.72 $ 3.94 $ 3.96 $ 2.52 * AU$ based on AU$1.00 = NZ$1.12

9. Pasture Harvest - Dryland Tas- mania South West VIC Gipps- land VIC North Irr’n VIC West Aus South Aus New Zea- land 2006 Avg 9.16.47.42.55.14.511.5 2007 Avg 8.75.97.41.95.23.811.6 2006 T10% 11.17.89.33.15.35.513.9 2007 T10% 11.17.39.12.75.94.214.2

10. Pasture Harvest - Irrigated Tas- mania South West VIC Gipps- land VIC North Irr’n VIC West Aus South Aus New Zea- land 2006 Avg 11.710.911.99.28.310.616.1 2007 Avg 12.510.19.97.49.77.416.3 2006 T10% 12.513.314.811.58.712.217.3 2007 T10% 15.812.412.310.611.010.917.7

11. Tassie’s Scorecard Strengths:  Pasture harvest (& stocking rate)  Labour efficiency  Core per cow costs Competitive:  Milk per hectare  Forage cost (low use)  Core per hectare costs Less Competitive:  Milk per cow  Concentrate Cost (due to locality)

12. Hypothesis No.1  Milk production per cow is a primary driver of profitability in pasture-based dairying Given cows need a set amount of energy for maintenance…if we can feed them better then more energy will go into milk production which must be more efficient  Tasmanians & New Zealanders have been chastised over their low level of milk production per cow for many years…well…

13. ROA vs Litres per Cow

14. ROA vs Milksolids per Cow

15. COP per kgMS vs Litres per Cow

16. COP per Litre vs Litres per Cow

17. Labour Efficiency vs Litres per Cow

18. Core per Cow Cost vs Litres per Cow

19. Conclusion Given cows need a set amount of energy for maintenance…if we can feed them better then more energy will go into milk production which must be more efficient  There is not a positive correlation between milk production per cow and profit  So more milk per cow in itself will just as likely lose money as make money  To make more money from more milk per cow, the critical components to master are pasture harvest, labour efficiency and core per cow costs

20. Hypothesis No.2 With the high cost of land and/or water it will be important to generate more revenue from this…so more supplementation and use of high yielding crops  Would irrigation water be better utilised on much higher yielding crops than ryegrass?  Substantial lifts in stocking rate along with higher yields per cow have the potential to produce dramatically more milk per hectare  One impact is that pasture decreases as a percentage of diet

21. ROA vs % Pasture in Diet

22. COP per kgMS vs % Pasture in Diet

23. Pasture Harvest vs % Pasture in Diet

24. Core per Cow Cost vs % Pasture in Diet

25. Conclusion With the high cost of land and/or water it will be important to generate more revenue from this…so more supplementation and use of high yielding crops  There is not a positive correlation between increasing supplement use and profit  So increasing supplement use in itself will just as likely lose money as make money  To make more money from higher supplement use, the critical components to master are pasture harvest and core per cow costs

26. Hypothesis No.3  Stocking rate is a primary driver of profitability in pasture-based dairying Given milk per cow does not appear to be a primary driver then stocking rate had better be…or are we not in the business of producing milk?  And if stocking rate is a primary driver then is there a ‘right’ stocking rate or is it just that ‘higher is better’

27. ROA vs Stocking Rate

28. COP per kgMS vs Stocking Rate

29. Pasture Harvest vs Stocking Rate

30. Conclusion Given milk per cow does not appear to be a primary driver then stocking rate had better be…or are we not in the business of producing milk?  Stocking rate does positively correlate with profitability  The link to pasture harvest appears critical  Potentially a ‘sweet spot’ that optimises profit depending on productive capacity of land

31. Hypothesis No.4 Pasture is the primary driver of pasture-based dairying profitability  Is more pasture simply better for business?  Where does it rate compared to alternative feeds and farming systems?

32. ROA vs Pasture Harvest

33. COP per kgMS vs Pasture Harvest

34. Labour Efficiency vs Pasture Harvest

35. Summary  Pasture IS the primary driver of profitability  IF increases in milk production per hectare result in more profit then stocking rate is likely to be the primary driver  To make more money from more milk and supplements, the critical components to master are pasture harvest, labour efficiency and core per cow costs  Maintaining a low cost of production is at the heart of our international competitiveness – we lose this at our peril

36. The Opportunity in Tassie To keep improving in the areas of strength To further increase performance in the areas of:  Pasture harvest  Stocking rate (more milk per ha)  Labour efficiency  Core per cow costs  Lower cost of production

37. And the winners were…  Sharefarmer; Wayne & Angela Huisman  Irrigated; Paul & Nadine Lambert  Low Concentrate; Paul & Nadine Lambert  Medium Concentrate; Stephen & Karen Fisher  Tasmania; Stephen & Karen Fisher  Supreme (dryland); Stephen & Karen Fisher  Trans-Tasman; Stephen & Karen Fisher

38. Tassie Finalists ROC Profit per Ha Cost of Prod’n Milk Prod’n - MS/ha Pasture Harvest –DM/ha Labour Effic- iency Core per Cow Cost Fisher9.7%$2,011$3.141,35212.6168$430 Lambert9.5%$2,719$3.021,68215.4125$361 Huisman & Camp- bell 9.1%$1,853$3.141,50513.3156$409 Huisman (Sharef) 13.6%$710$1.691,50513.3156$232 Rogers8.8%$1,630$3.031,12612.6135$308

39. So how do you do it…  Farming philosophy summarised in a few words  How do you judge success  Thoughts on the following:  Milk production  Stocking rate  Pasture production  Feed purchasing  Labour efficiency  Cost control  Where to from here…

40. Tasmania Dairy www.redskyagri.com