Culling dairy cows as a response to drought in northern Victoria

Conditions for the dairy industry in northern Victoria over the past decade have been tough. High prices for feed inputs, especially when combined with low farmgate milk prices, have seen situations where dairy farmers are losing money feeding cows. In this environment, it is natural to consider whether culling in response to drought followed by replacement as conditions return to normal would leave farmers better off. This working paper develops a methodology to quantitatively evaluate culling during drought conditions for the northern Victorian dairy industry. The methodology is applied to two recent years of drought, 2002 03 and 2007 08. While higher feed costs provide reason to cull, this is largely offset by lower cull prices and higher replacement heifer costs. Farmgate milk prices also play an important role. The methodology was extended to consider a two-year drought. It was found that duration of the drought has a potentially large impact on optimal culling response.