There was no magical new technology.
In fact, the model was already used by farmers who were profitable on a $4.30 payout, being able to operate on a breakeven figure of $3.30.
The Ministry for Primary Industries’ Farm Systems Change study looked at the animal health, environmental and financial performance of a select group of high-performing farmers to determine what made them different.
Sector policy director Jarred Mair said those farmers were maximising the use of their capital and in doing so were more profitable, had high production and in some cases an environmental footprint 40% lower than contemporaries while meeting strict nitrogen caps.
“They are efficient capital structures and processes.”
Case studies found farms making a 40% return on investment in a low-payout environment and 100% when the payout was high.
Mair said in one case they studied two farms next to each other that each had similar herd shelters.
They found one farm was performing strongly but the other was struggling so were digging deeper to determine why.
A common theme was the difference in how they used their capital investment but Mair said there was also disconnect between the information provided by bankers, accountants and farm advisers and how to run a capital-efficient farm.
Capital efficiency was about how it was attributed and how the business was structured but it also required slightly different metrics to measure.
Initial conclusions were that productivity gains were still possible in existing farm systems and with existing capital through tweaking processes and systems.
But it also found that if banks, accountants and farm advisers delivered a consistent message, farmers would be more efficient in their use of capital.
The project followed an assessment of the goal of growing exports to 40% of GDP, which would require a doubling of primary sector exports from $32 billion to $64b.
Meeting those goals also required significant capital investment.
Mair said the next step was talking to bankers, accountants and farm advisers including Dairy NZ about the information gathered from the case studies so lessons could be more widely adopted.
With increasing regulation and public questioning of the impact of farming, spreading the message of how to operate with a low environmental footprint while growing or at least holding production was invaluable.
“It will give farmers options to look at their operations differently and to learn from other farmers,” Mair said.
