Farmers should continue to farm Holstein Friesian cows: New Zealand milk pricing models have to change!

Dairy farmers take feed and convert that to milk and other farm products which are converted, typically in New Zealand by member co-operatives into marketable products for sale. The net revenue is distributed back to members through various payment models with the aim of providing clear market signals as to the value of their milk. Correct interpretation of those pricing signals should lead to the development of optimised systems to produce the right raw materials for more products. Could those signals in the New Zealand be so distorted that we are breeding for a less efficient animal than we could and destroying value? Today, for most suppliers, the market price is signalled to farmers through a Fat + Protein – Volume pricing model. It will be shown that this model is deficient in returning the correct pricing signals and is creating inefficiencies on farm and during manufacturing. More closely matching milk supply to finished product will improve on farm efficiency to converting feed to milk and manufacturing efficiencies in turning milk into products.