Milk producers in northern Australia are attempting to make rapid adjustments to production systems that enable them to compete in a newly deregulated market, although there is uncertainty about how to do this. Through industry consultation and expert review a process was developed to identify production systems that may be capable of supporting economic targets of 10% return on assets and 600,000 L milk/labour unit. A broadly based project team in terms of disciplines then used this process to identify five production systems which were each applicable to substantial numbers of current milk producers. These were modelled using whole farm economic analyses and annual feed planning, using an iterative process over an extended period, to determine the economic and physical parameters of each system when achieving the above economic targets. All five systems achieved substantial increases in milk output from present natural resource bases, and require herd sizes from 280 to 900 cows to achieve targets. The models showed a high sensitivity to return on assets in relation to milk price, herd size and milk yield per cow, and less sensitivity to variation in input costs. It was concluded that substantial increases in milk output from farms are needed to meet economic criteria, and that the natural resource base is capable of supporting these increases. The financial risks of such increases largely relate to the difficulties in maintaining cash flow during a period of rapid capital investment and expansion. It is also accepted there are environmental risks if such rapid development takes place, though these require further quantification.


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