Development of different technical, economic and financial benchmarks as management tool for intensive milk producers on the Highveld of South Africa

Abstract

Extensive studies have been done in the various fields of dairy production such as, reproduction, herd and animal health, feeding and nutrition and the economics of milk production. This study aims to incorporate the standards or benchmarks set out in these studies, in order to identify different technical and financial benchmarks that can be used as management tool by intensive milk producers. Benchmarking can be described as a process whereby a firm (farm) compare its processes, results or actions against that of competitors with the best practice in the industry. To become competitive a farm business must have the ability to compare (benchmark) itself against others, and preferably against others that perform better, but also make adjustments according to the comparison. Benchmarking is therefore a continuous process of comparing and adjusting where necessary. The dairy industry in South Africa changed dramatically since deregulation in the early 1990’s. The industry went from a highly regulated one-channel market to a completely free-market system. This meant that farmers had to become more competitive, both locally and internationally. Three different types of production systems are used in the six production regions in South Africa. These production regions can be divided into two main regions: the coastal regions and the Highveld region. Production in the coastal regions is normally pasture-based, with additional concentrate feeding in some cases. On the Highveld and in the Western Cape, production is based on a total mixed ration (TMR), where cows are fed the complete ration in an intensive production system. Benchmarks were identified for herd health and reproduction, feeding and nutrition and economic and financial performance. Lastly, some additional general benchmarks were defined for bio-security and capacity utilisation. Herd health and reproduction can be divided into the three main areas of fertility performance, udder health and general herd health. Nutrition and feeding can be divided into benchmarks for: intake, nutrient requirements, body condition scoring, calf and heifer feeding, and additional general feeding benchmarks. The economic and financial performance of the dairy farm business can be evaluated against benchmarks for costs, solvability, liquidity, profitability, debt repayment and capital efficiency. It is very important to note and remember that when a dairy farm is evaluated, all the norms or benchmarks must be seen in a holistic way. All the parameters, and therefore every benchmark, are interrelated and cannot be judged or applied individually. Feeding will have an impact on production and reproduction and therefore on financial performance. This study focuses only on benchmarks for intensive milk producers, but it is recommended that it can be extended to include benchmarks for milk production in the pasture-based production systems as well. Since the dairy industry operates in a free-market system and South Africa is an open economy, it is important to be globally competitive. This can only be achieved if local producers benchmark themselves against international standards. Benchmarks can only be used if they are quantified. It is therefore recommended that benchmarks are published for the dairy farmer to use in his evaluations. The Nominal Group Technique worked well to establish the parameters and their benchmarks and farmers can also benefit from this technique. All related parties to the dairy farm, such as the financial consultant or agricultural economist, animal nutritionist, veterinarian and other input suppliers can form a specialist group to evaluate the performance of the dairy together with the producer or herd manager. This specialist group can then recommend adjustments to be made, after discussing the effects on every aspect of production.