Previous bioeconomic studies have mainly concentrated on beef operations, principally stocker activities, and rangeland conditions. These studies have assumed that the rancher determines some desired weight gain per head over a period, usually one year, and this weight gain is achieved by utilizing a resource such as pasture or grazing rangeland. This study differs to the previous research as we are interested in the interactions between pasture productivity and milk yield in an intensive grazing situation, rather than extensive grazing and incorporate more than one type of pasture or forage type into a model of a dairy system. We develop a discrete optimal control model based on the energy demand of a herd of dairy cows and the supply of energy available from the various forages produced on a model dairy farm. The objective of the model is to maximize the net present value of the flow of profits generated by the dairy. Incorporated into the model is a herd dynamics sub-model, a transferable quota trading equation, and a milk revenue function.