Investor Presentaiton
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The dairy industry in Tasmania
A guide for investors
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As Table 4 (page 12) indicates, farm
prices can vary considerably.
The values included in the indicative
costs of buying a dairy farm are
representative of better farms sold in
Tasmania the past few years.
They assume a bare-land value of
$14 000 per hectare for dryland and
$21 000 per hectare for irrigation area
(including water and underground
mains and other costs).
On the assumptions here, there is
limited reduction in capital cost per
hectare or per cow as farm size and
cow numbers increase. Any reduction
is likely to come from spreading
the cost of the milking facility over
additional hectares/cows, especially with
a rotary dairy (for example, 500 cows
versus 750 cows).
On the other hand, the 250 cow farm
has a relatively low-value herringbone
shed included in its improvements and
so has an overall capital per cow similar
to the larger 500 cow farm with a
rotary dairy.
The average milk price is assumed to be
around $6.00 per kg milk solids, which
is below where prices are currently, but
are in line with the longer term trend.
They are shown to increase by
5c per kg milk solids, between the
250 cow farm and the other farms.
The actual increase based on quantity
premiums should be higher than this,
but milk quality also needs to be taken
into account and it can be difficult to
maintain standards with larger herds.
Pasture utilisation
Pasture utilisation is the most
significant driver of profit in
Tasmanian pasture-based dairy
systems.
Typically the best results are
achieved by paying close attention
to the pasture supply and demand
situation, and making astute decisions
about grazing management and
supplementary feeding. Increasing
pasture utilisation by one tonne of
dry matter per hectare (10 per cent)
can make a significant difference to
overall profitability.
Training in grazing management is
available through the Tasmanian
Institute of Agriculture (TIA) and
assistance in on-farm implementation
and monitoring is available from
private consultants.
Labour use
Labour and feed are the most
significant cost inputs. Within the
model farms, full time equivalents
(FTE's) have been used to define labour
requirements. This is the number of
employees (including the manager)
required to run the farm, based on a
38 hour week. The budgets assume
that all labour (including the owner/
manager) is fully paid for.
In most instances, significant increases
in disposable income can be achieved if
owners or share farmers elect to take
on a greater proportion of the work.
Labour use efficiency is generally
measured as the number of cows
milked per FTE. The average is around
80 to 90 cows per FTE, but well-set
up farms can exceed 100 cows per
FTE. Generally as farm size increases
there are labour efficiencies. These may
continue to increase with herd sizes
up to 1 200 cows.
Table 8: Wages cost
Number of cows
Labour required (FTE)
Owner operator
250
500
750
1 000
1.0
1.25
1.25
1.5
Other wages
2.0
3.75
5.25
6.5
Total
3.0
5.0
6.5
8.0
Cows per labour unit
Wages cost
33
83
100
115
125
Owner operator
Other wages
$68 330
$91 100
$102 490
$113 880
Total
Average cost per labour unit
Labour cost per kg milk solids
$89 000
$157 330
$52 450
$1.57
$166 880
$257 980
$51 600
$233 630
$336 120
$51 750
$289 250
$403 130
$50 400
$1.32
$1.15
$1.06
Source: Macquarie Franklin, April 2017View entire presentation