The Economics of Total Mixed Ration Systems in Australia

Abstract

An increasing proportion of dairy farmers in Australia are looking to transition from pasture-based systems (PB) to confinement, zero-grazing or Total Mixed Ration systems (TMR) in response to climatic pressures, market volatility or growth opportunities. However, there is little understanding of the economics of these systems under local conditions, and therefore, farmers have typically had to rely on information from overseas to support their decision-making. This study, conducted as part of the DairyUP Program (https://www.dairyup.com.au), aimed to compare the performance of commercial dairy farms operating TMR with those operating PB. Physical and economic data from TMR (n = 7) and PB farms (n = 58) were collected across different regions in New South Wales over five financial years (2016/2017 to 2020/2021) using the Dairy Farm Monitor Project methodology. The TMR farms operated a range of confinement systems (drylots, compost barns or freestalls) and were in different phases of the transition towards zero-grazing (all had transitioned the milking herd to zero-grazing by 2020/2021). Prices were adjusted by inflation and expressed in Australian dollars per kg of milk solids ($/kg MS). Differences between systems were analysed using linear mixed models with farm and year as random effects. Compared to PB farms, the TMR had larger herd sizes (564 vs 356 cows) and total usable area (604 vs 291 ha) and produced more milk per cow (608 vs 491 kg MS/cow). Despite gross farm income ($9.30/kg MS) and earnings before interest and tax ($1.22/kg MS) being similar between both systems, profitability, when measured as return on total assets, was greater for TMR (5.3% vs 2.4%). On average, variable costs, including feed, herd and shed, were similar between TMR and PB ($4.98/kg MS). Both TMR and PB farms had similar total overhead costs ($3.08/kg MS), including total labour costs, depreciation and repairs & maintenance. This research is the first in Australia to investigate the differences in performance between TMR and PB systems. Insights from this study can help improve planning and decision-making of dairy farmers considering or operating TMR systems.