Social and economic impacts of the Basin Plan in Victoria February 2017

6.2A brief discussion of the complexity involved in substituting feed for water

Irrigated dairy farming is more complex than irrigated cropping because on top of the complexity of growing and sourcing feed, the technical efficiency of cattle feeding systems also varies. For example, the responses in production from feeding concentrate supplements varies widely depending on operator knowledge and skills, the amount and characteristics of pasture being offered and consumed, the amount and composition of the supplement being fed and genetics, stage of lactation and production level of cows in the herd (Doyle, Gibb and Ho, 2009).

Each dairy farm business is unique. Farmers each have different goals, business skills and knowledge, technical skills and knowledge, and attitudes to risk. Farm resources in terms of land (area and capability), water (rainfall and entitlements), infrastructure, labour (skills and knowledge) and herd characteristics vary. Dairy farm businesses also operate in an economic environment where milk prices vary depending on the company supplied, as well as from year to year and within each year. The climate across the southern-connected basin varies and there are marked variations in seasonal weather patterns in different areas. This complexity means that the efficiency (productivity) of any one dairy farm is likely to differ to that of any other farm using a similar system. Flexibility in the production system is therefore essential. This means that tactical (within year or season) decisions are as important as strategic (longer term) decisions to dairy farm business performance (Doyle, Gibb and Ho, 2009).

The Victorian dairy industry has always needed to deal with seasonal variability but with increased intensity of farming, together with volatility in milk prices, allocation prices and other input costs, there is an increasing emphasis on the need for adaptive strategies. The last decade of extreme weather in many areas of Victoria has highlighted just how variable the seasons can be. Feed is the largest cost for a dairy farm and the growing conditions are a major variable. This makes selecting the most appropriate mix of forages and adaptive feeding strategies very important for dairy farms (Mickan, 2015).

Five different dairy feeding systems are common in Australia. They can be summarised as follows:

1. 
   Grazed pasture and other forages with up to one tonne per year of grain and concentrate feeding in bail
   
2. 
   Grazed pasture and other forages with more than one tonne per year of grain and concentrate feeding in bail
   
3. 
   Grazed pasture for most or all of year, with partial-mixed-rations consumed on a feed pad with or without grain and concentrate feeding in bail
   
4. 
   Hybrid system – grazed pasture for less than nine months per year, with partial-mixed-rations consumed on a feed pad with or without grain and concentrate feeding in bail and total-mixed-rations for more than three months per year
   
5. 
   Total-mixed-rations system – no grazing because cows are housed and fed total-mixed-rations
   

Moving from the first system to the fifth requires progressively more focus on the balance of dietary fibre, rumen health, feed quality, feed palatability and nutritional balance. It therefore involves taking on increasing levels of risk and making a commitment to acquire more skills.

Despite their differences each of the five main feeding strategies aims to:

• 
  Optimise total daily feed intake (with the optimum intake changing in line with milk prices)
  
• 
  Maintain high feed quality
  
• 
  Maintain good rumen function
  
• 
  Minimise feed gaps throughout the year
  
• 
  Minimise feed wastage
  

6.3A short history of irrigator experience with different feeding systems

Before the Millennium Drought (the dry period that extended from late 1996 until mid 2010 in Southern Australia), northern Victoria’s dairy industry had, for an extended period, experienced weather conditions in line with long-term climate averages. Regional milk production in 2000/01 was 2,751 million litres, with an estimated farm gate value of $780 million (Murray Dairy, 2001). Nearly all (96%) of the milk was used for manufactured products. The region contained approximately 2,640 farms with a total regional herd size of 508,613 cows (Dairy Australia, 2016). Average farm debt was $105,000 (2009/10 dollars) for dairy farms across Victoria, and this was comparable with estimated figures for northern Victoria (Harris, 2011).

A survey of irrigation farms in the GMID in 1988 showed that 68.5% of their irrigation water came from water rights (now high reliability water shares) with 17.1% from sales water (similar to today’s low reliability water shares) and the remaining 15% from other sources such as groundwater (SIRLWSMP, 1989). This distribution was little changed at the commencement of the Millennium Drought. The industry was continuing to improve its use of water, and by the mid 1990s over 60% of the irrigated area in the Goulburn Broken catchment was laser graded, and 1,250 re-use systems had been installed (GB CMA, 1997). Landholders invested an estimated $126m in these initiatives with government co-investment adding $60.7m (GB CMA, 1996).

At that time, the three less capital intensive, less complex feeding systems outlined above were dominant (Little et al, 2009). Those less complex feed systems are based on homegrown pasture. Dairy farmers endowed with high volumes of water entitlement per hectare, for example those in the eastern GMID, grew perennial pastures to optimise stocking rates and hence returns per hectare. Farmers endowed with lower volumes of water entitlements per hectare, for example those in the western GMID, where water was more limiting than land, generally relied more on annual pastures and often grew fodder crops away from the milking area, as a risk management strategy (Dairy Australia, 2009).

Feeding strategies at that time were focused on improving pasture growth through better nutrient management and improving pasture conversion efficiency through better grazing management. Although feed concentrates and grains began to be used in the drought of 1982/83, they were still being used at relatively low levels at the start of the Millennium Drought, when they averaged 0.6 tonnes per head (Harris, 2011).

During the Millennium Drought, the dairy industry’s water substitution strategies included purchasing fodder, changing pasture type (from perennial to annual) and agisting non-milking cows or grazing them on non-irrigated pastures. It is important to note that for many farmers this meant a move away from the three least capital intensive, least complex feed-base systems, which as outlined above had previously been most common in northern Victoria. Moving into the other two more capital intensive, more complex systems was a rational choice in order to minimise losses and maintain productive potential for when the drought broke, but it proved costly for most dairy farmers. Dairy Australia (2009), writing at that time, said that “a number of dairy farms in the region have generated competitive rates of return”. They were in the minority however; ABARES (2015) data shows that overall dairy farmers’ indebtedness increased in this period. In fact, dairy farm cash incomes generally fared worse than horticultural or broadacre farms during the drought (Figure ).

Figure : Farm cash income, by industry, 2006–07 to 2012–13

Note: Farm cash incomes are average per farm.
Source: ABARES 2014.10 from ABARES survey of irrigation farms in the Murray–Darling Basin.