Competing with the US
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1 Competing with the US Farmers Forum: 2014 David McCall GM Development & Extension
2 Outline Competitiveness US dairy farming Implications for us
3 What is the competition for? Sport: Win tournament Business: Market share
4 How is winning measured? Sport: Points table Business: Sales revenue Sales volume Share of profits
5 Why is competitiveness important to me as a farmer? Carpet wool example Volatility, their farmers go broke first Asset growth long term
6 How do we measure up? Currently number one 66% of profits
7 Cost milk production $US/100kg milk equivalents Argentina Ukraine Australia Brazil What makes us competitive? Global price band USA EU New Zealand Export volumes (milk equivalents) Source: OECD-FAO, IFCN, DairyNZ Economics Group
8 Outline Competitiveness US dairy farming Implications for us
9 US supply, west versus east West California Idaho New Mexico East Pennsylvania Wisconsin New York Export Domestic
10 Cost milk production $US/100kg milk equivalents Argentina Ukraine Australia US two supply regions Global price band USA EU New Zealand Export volumes (milk equivalents) Source: OECD-FAO, IFCN, DairyNZ Economics Group
11 US mega-dairy stats... US milk supply 4 x NZ s 40% from 800 mega-dairies Mega-dairy >2,000 cows To 12,000 cows; 30,000 head Equivalent of all New Zealand s milk from 540 US mega-dairies
12 US dairy farms consist of this
13 And this
14 Confinement systems, open lot
15 Cheap to build (NZ$650/cow)
16 Straw used as bedding in shelters
17 Free-stall confinement
18 Exercise yards with freestall barns
19 Air conditioned; cross ventilation
20 Inside a cross vent barn
21 Milking infrastructure
22 Milking and labour
23 Continuous supply to factory
24 Holsteins producing 700kgMS/cow
25 Calves, one born every 30 minutes
26 Calf cafes California style
27 Feed total mixed rations
28 Numerous concentrate options
29 Large forage inventories
30 From a distance
31 Effluent is separated
32 Fibre laid in rows to dry
33 One of 4 separated-effluent ponds
34 Capital cost $7 to $15 / kg MS
35 Exports, New Zealand and US Source: DairyNZ Economics Group, UN COMTRADE (World Bank WITS)
36 Corn available for feed Million bushels Corn $/bushel Feed corn rebounding; price dropping 8,000 Corn for feed Corn price $8.00 7,000 $7.00 6,000 $6.00 5,000 $5.00 4,000 $4.00 3,000 $3.00 2,000 $2.00 1,000 $ / / / / / / / / / / / / / /14 $0.00 Source: USDA, DairyNZ Economics Group
37 Corn for biofuel plateau Source: USDA Economic Research Service
38 Benchmarking US vs DairyBase ($/kg MS) California New Zealand Income Costs Feed Other Total Cash operating surplus Interest and rent Surplus after interest and rent
39 Benchmarking US vs DairyBase ($/kg MS) California New Zealand Average Top 25% Average Income Costs Feed Other Total Cash operating surplus Interest and rent Surplus after interest and rent
40 Mega-dairy competitive advantages Ability to expand rapidly Precision management Scale to take advantage of technology Environment Leveraging highly capable management
41 Outline Competitiveness US dairy farming Implications for us
42 NZ use our competitive advantages Export history Producing what the customer wants Responsive supply chains Reliable supplier of safe food China free trade agreement On-farm uniqueness Cooperative, information sharing culture Grazed pasture still cheapest feed source internationally
43 What do we need to do? Precision approach to pasture systems Reduce waste Input precision Solving environmental issues appropriately Not head to head with US in their systems
44 Lesson from Japan Small scale Relying on imported feed: 55% Production cost $13 / kg MS
45 Head to head with the US (NZ$) US NZ Feed Costs ($ / kg DM) Corn silage Lucerne hay/grass silage Grain Pasture Labour Cost ($ / hour) $10 - $12 $13 - $30 Housing infrastructure ($ / cow) $1,100 - $1,500 $2,500 - $3,500
46 Conclusion US mega-dairies making big efficiency gains Farm to our competitive advantage Increased precision Appropriate infrastructure responses to environmental challenges Avoid over-reliance on imported feed sources
47 Spare slides
48 US cow numbers, production per cow US cow numbers and per cow production, Source: DairyNZ Economics Group, United States Department of Agriculture (2013)
49 US corn acres & yields Source: USDA Economic Research Service
50 Income over feed cost margin Source: DairyNZ Economics Group, Commercial Agriculture Program University of Missouri (pers. comm. Horner, 2013)
51 '000 tonnes Dairy vs plant protein production 2,000 1,800 1,600 1,400 1,200 1, Dairy Plant Source: Frost & Sullivan, 2010, DairyNZ Economics Group
52
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