Production and economic responses to intensification of pasture-based dairy production systems

Production from pasture-based dairy farms can be increased through using N fertilizer to increase pasture grown, increasing stocking rate, importing feeds from off farm (i.e., supplementary feeds, such as cereal silages, grains, or co-product feeds), or through a combination of these strategies. Increased production can improve profitability, provided the marginal cost of the additional milk produced is less than the milk price received. A multiyear production system experiment was established to investigate the biological and economic responses to intensification on pasture-based dairy farms; 7 experimental farmlets were established and managed independently for 3 yr. Paddocks and cows were randomly allocated to farmlet, such that 3 farmlets had stocking rates of 3.35 cows/ha (LSR) and 4 farmlets had stocking rates of 4.41 cows/ha (HSR). Of the LSR farmlets, 1 treatment received no N fertilizer, whereas the other 2 received either 200 or 400 kg of N/ha per year (200N and 400N, respectively). No feed was imported from off-farm for the LSR farmlets. Of the 4 HSR farmlets, 3 treatments received 200N and the fourth treatment received 400N; cows on 2 of the HSR-200N farmlet treatments also received 1.3 or 1.1 t of DM/cow per year of either cracked corn grain or corn silage, respectively. Data were analyzed for consistency of farmlet response over years using mixed models, with year and farmlet as fixed effects and the interaction of farmlet with year as a random effect. The biological data and financial data extracted from a national economic database were used to model the statement of financial performance for the farmlets and determine the economic implications of increasing milk production/cow and per ha (i.e., farm intensification). Applying 200N or 400N increased pasture grown per hectare and milk production per cow and per hectare, whereas increasing stocking rate did not affect pasture grown or milk production per hectare, but reduced milk production per cow. Importing feed in the HSR farmlets increased milk production per cow and per hectare. Marginal milk production responses to additional feed (i.e., either pasture or imported supplementary feed) were between 0.8 and 1.2 kg of milk/kg of DM offered (73 to 97 g of fat and protein/kg of feed DM) and marginal response differences between feeds were explained by metabolizable energy content differences (0.08 kg of milk/MJ of metabolizable energy offered). The marginal milk production response to additional feed was quadratic, with the greatest milk production generated from the initial investment in feed; 119, 99, and 55 g of fat and protein were produced per kilogram of feed DM by reducing the annual feed deficit from 1.6 to 1.0, 1.0 to 0.5, and 0.5 to 0 t of DM, respectively. Economic modeling indicated that the marginal cost of milk produced from pasture resulting from applied N fertilizer was less than the milk price; therefore, strategic use of N fertilizer to increase pasture grown increased farm operating profit per hectare. In comparison, operating profit declined with purchased feed, despite high marginal milk production responses. The results have implications for the strategic direction of grazing dairy farms, particularly in export-oriented industries, where the prices of milk and feed inputs are subject to the considerable volatility of commodity markets.