John Mulvany, OMJ Consulting, who is retiring after nearly 30 years advising farmers, said he was concerned that the dairy sector seemed to have lost its way by not recognising success.
“A profitable New Zealand dairy farmer will be on a bit of a pedestal within the community, whereas a profitable dairy farmer, particularly on mainland Australia, could be regarded as a tall poppy skiter,” Mr Mulvany said.
He said recognising success went against what he said was the “preferred narrative” in some quarters that dairy farming was a thankless job with little reward.
Dairy farmers were seen as “martyrs”, rather than successful business people.
“It means the population of dairy farmers who are prepared to share significant data and learn from significant data is fairly narrow,” he said.
There was one young farmer discussion group in Colac, where members had to release some of their data before being allowed to join.
“You are not allowed to whinge and moan about the dairy industry unless you articulate your reasons for whingeing and moaning,” he said.
“It’s a very business-orientated group.
“That’s all I am talking about when I mention a shift in culture.”
Hard to filter distracting noise
Mr Mulvany said there was also an increased level of distracting and confusing “noise”, within the industry, with farmers requiring better “filtering skills”.
A recent example was the ongoing debate about the best measure of profit for a dairy business.
“The resulting mixed messages make success or profit more difficult to achieve compared to when I entered the industry,” he said.
He said there would be a “national black hole” – and a level of fake news in the industry – if the Dairy Farm Monitor program or DairyBase did not exist.
He said dairy planners had talked a lot about changing culture, but not the mechanics of how to do that.
The other issue he was concerned about was the current debate about profitability.
“There is a debate going on about the best measure to use, and what we should be targeting,” he said.
“That’s all the easy stuff.
“The really hard stuff to track is how do you get more dairy farmers to review their financial performance, particularly when they are not happy with the outcomes?
“I see a lot of energy going into the debate about what is the best measure of profitability, and my point is there are a whole raft of ways of measuring profit, and it depends on the questions the person is asking.”
Mr Mulvany said the critical thing was how to get more farmers to participate and shift the language from production to profit.
“My major contention is with the belief that return on total assets (RoTA) is the only profit indicator we should look at,” he said.
He said profitability was not all about production.
“There is a very weak correlation between production per cow and profit,” he said.
“In fact they are not that strongly related.
“A dairy farmer will tell another farmer how many litres his cows are producing, but why would you do that, what’s the motivation?
“What is the purpose of that comment?
“Without a whole lot of more information, it’s a meaningless measure.”
RoTA should be looked at as one of a raft of measures that described a farmer’s profitability.
Mr Mulvany said any advisor who argued there was only one primary measure of profit in a dairy business reflected a narrowness, and potentially a lack of respect for their client.
“If our ultimate aim is to lift overall profitability on dairy farms, and connecting with a broader dairy population, using economic measures that they engage with is the critical step, rather than getting bogged down in economic purity,” he said.
He said Earnings Before Interest and Taxes (EBIT) was the one measure which dairy farmers engaged well with.
Focusing on increasing profit
Dairy Australia managing director David Nation said the organisation had actively participated in the development of the Dairy Plan, and fully endorsed its objective to increase profit.
“The focus on profit, including measuring profit and having an industry target for levels of profitability, is a defining feature of the Australian Dairy Plan,” Mr Nation said.
“It is a really positive development to see so many parts of industry as well as academia supporting this initiative.
“The debate on the best way to measure profit is a natural consequence of the focus on profit.
“It is healthy to debate this, as getting profit right is in everyone’s best interests.”
Mr Nation said describing profit in the most meaningful way, while also being able to drive industry progress, was the challenge that had been set up for a group of business advisors.
“It is pleasing to see genuine innovative thinking in this regard,” he said.
“We strongly believe, through analysis and through testing with farmers, that we have an approach that will fast-track progress for the dairy industry while also recognising the economic principles of measuring profit,” he said.
