Improving the profitability of Waikato dairy farms: Insights from a whole-farm optimisation model

© 2014, © 2014 New Zealand Association of Economists Incorporated. High milk volumes are encouraged in the New Zealand dairy industry to promote market access and utilise processing capacity. A detailed, nonlinear optimisation model of a pasture-based dairy farm in the Waikato region is used to: (1) assess the implications of maximising operating profit, (2) evaluate the cost of maintaining a focus on producing high milk volumes, and (3) characterise general management practices that maximise operating profit. Maximising milk volume within the simulated farm system reduces operating profit by 12%–23%, due to higher production costs. Nine principles for profitable management are developed, based on model output. These focus on the use of a medium to medium-high stocking rate (3–3.7 cows ha−1) to promote the growth, quality, utilisation, and intake of pasture. Imported concentrate is valuable to augment production in mid-lactation, but it is best to avoid feeding cows to potential given the high cost of supplement.