Live update on TMR farm performance – Raising the Roof Conference 2026

Welcome to this episode of The Business of Dairy. In this live recording from the 2026 Raising the Roof conference in Shepparton, Victoria, Claire Waterman from Agriculture Victoria and Sheena Carter share the latest update from the Total Mixed Ration Feeding Systems – Dairy Farm Monitor report. Covering the 2024–25 financial year, the report now brings together nine years of analysis, with insights into farm profit and the key cost drivers shaping TMR systems, including feed, overhead and finance costs. Raising the Roof was a sold-out event hosted by Dairy Australia and its supporting partners, bringing together international speakers, Australian dairy service providers and farmers. A link to resources related to intensive farm systems can be found in the show notes.

Resources:

DFMP – Total Mixed Ration Feeding System reports

Dairy Australia – Farm Systems resource page  

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Produced by Liam Driver

The information discussed in this podcast are for informative and educational purposes only and do not constitute advice. 

Transcript

Episode #61 Transcript – Live update on TMR farm performance – Raising the Roof Conference 2026

Sheena Carter:

Welcome to this episode of The Business of Dairy. In this live recording from the 2026 Raising the Roof Conference in Shepparton, Victoria, Claire Waterman from Agriculture Victoria and I, Sheena Carter, share the latest update from the Total Mixed Ration Feeding Systems Dairy Farm Monitor report. Covering the 24-25 financial year, the report now brings together nine years of analysis with insights into farm profit and the key cost drivers shaping TMR systems, including feed, overhead and finance costs. Raising the Roof was a sold-out event hosted by Dairy Australia and its supporting partners, bringing together international speakers, Australian dairy service providers and farmers. A link to resources related to intensive farm systems can be found in the show notes.

Sheena Carter:

Yes? Oh, yes. Excellent. Thank you. If we're not making money, at the end of the day, it's kind of pointless. Someone in the audience said that earlier this morning, and hopefully we will be able to convince you one way or the other whether it is pointless or not. So normally my podcasts are done remotely and virtually, so it's nice to be able to have you live as the guest today, Claire.

Claire Waterman:

Thank you. Long time listener, first time caller. I love listening to the Business of Dairy podcast. So it's a real treat for me to be here and being interviewed by our star host of the podcast. Thanks.

Sheena Carter:

Thanks Claire. And normally I don't have a live audience either. So it's great to have you all listening this morning. First of all, I would really like to thank all the participant farmers that we have in this project. They have enabled the dairy industry to have a unique data set that enables us to have these conversations and understand the performance that we're seeing in the businesses. So a big thank you to them and also to the project partners, Dairy Australia, New South Wales DPIRD, Dairy Up and also Agriculture Victoria. So, and I should also thank the data collectors and other people that have provided technical input today. Now, Claire, TMR systems, how are we defining TMR systems and what type of housing systems have our farmers got that are part of the project?

Claire Waterman:

Yeah, so TMR, we've heard it across the last day and a half. So total mixed ration is what we're referring to our farms, TMR. So the milking herd is fed the TMR during the lactation period. And so these systems are associated with a significant investment in cattle feeding, housing and infrastructure. And on the slide is the three facility types that we have represented in our project. And we heard previously Indy introduced the guidelines. There's a wealth of information around the different types and things to consider.

Sheena Carter:

Excellent. So the project uses the Dairy Farm Monitor methodology for the analysis, which I hope many people in the audience are familiar with Dairy Farm Monitor. And it is looking at the performance today. We're talking about the performance of the businesses in the last financial year. At a high level, what did the profits look like on these farms?

Claire Waterman:

Yes, there's been a period of high returns for our TMR farms. There's also been a period of high returns for our comparative data set, the Grazing Dairy Farm Monitor Farms or DFMP if we use that acronym as well. But there has been a range in farm returns and so that range in terms of strong performance has been underpinned by really strong management skill.

Sheena Carter:

Okay and we'll dive into some of the drivers of this a bit later. What are the cost structures? What are we seeing with cost structures in TMR farms?

Claire Waterman:

So there has been a change in the cost structures as we move to a TMR system so for the purposes of today's presentation and there is a wealth of information that we collect as a result of the dairy farm monitor approach but for today we'll talk about feeding costs as well as overhead costs and interest and lease costs.

Sheena Carter:

Great. So this next slide, on this slide we can see the circles over New South Wales and Victoria, the regions in which the farms are from that we're analysing, the TMR farms. It's important to highlight this is not all TMR farms within these regions. It's just a sample of farms. The other thing is that we're looking through that farm monitor methodology, so it's only the performance of these farms in this system. Can you tell us a bit about the farms and the overall objective of the project?

Claire Waterman:

Yes, so the objective of the project was to improve our understanding of TMR performance to help inform planning and decision-making for those considering transition to a TMR as well as those operating a TMR system. We had 14 farms participate in the TMR project. So we had six in inland New South Wales and eight in northern Victoria. And we had the comparative grazing dairy farm monitor farms as that comparative group. And the farms participating in both of those groups are completely discreet. So there's no overlap in terms of the groups. The farms participating in the TMR group have made their transition to the TMR by 22-23. So for the last three years, they've been operating in the system that they had intended to transition to. In terms of what Sheena was mentioning before, the values certainly don't represent the dairy industry. They represent the farms that participate in the project. And just in terms of their contribution that the TMR farms are making to their respective industries, the six farms in inland New South Wales contributed around 20% of the total milk production in that region and the eight Northern Vic TMR farms are contributing around 6% of the total milk production in that region.

Sheena Carter:

Great. So that gives us some good context about the farms and their contribution. If we move now to the profits in these systems, So our profits here are represented by earnings before interest in tax on a dollars per kilo milk solids basis. The blue line is the TMR farms and the yellow hashed line is the DFMP or what we're calling our grass-based farms, our comparative farms. And you've mentioned that the last financial year was a profitable year. But how has this compared or how has this looked over time and differences between the two?

Claire Waterman:

So for the last financial year, the 24-25 year, we saw a decrease in average profits for the TMR group, so around a 12% decrease, but it has been a period of high return. So it's the third highest across that nine-year analysis period. And similarly with the grazing dairy farm monitor farms, they also experienced a decrease in average profitability in the last financial year, but remains high relative to the analysis period. So just looking over time in terms of how those TMR profits are looking. As I mentioned, the TMR farms have made their transition to their intended system for those last three years, and we can see average profitability is relatively stable.

Sheena Carter:

So they've ironed out the creases and things, hopefully, on average, humming along quite nicely in theory.

Claire Waterman:

Yeah, in theory, as we know with any development, not as significant as a transition to a TMR system, but it can be any developmental stage within a business, there's generally a lag between that development stage and when you're starting to reaping the rewards or getting the advantages of that system. So yeah, now three years in as everybody's now operating as a TMR, you're expecting to see some of those initial implementation issues being ironed out.

Sheena Carter:

Excellent. Now this slide, again, we're still looking at average profits. So, and this is for the last financial year, the blue dot is the average for the TMR farms and the yellow dot for the grass pasture-based farms. Now, the thicker blue line that you can see represents a range of the data set, a range in their profits over within that year. What can you tell us about perhaps some of the differences and the similarities, as the case may be, between these two systems?

Claire Waterman:

Yeah, so for the average dot, you can see the TMR farms of around 11% higher than the grazing dairy farm monitor farms. But we can see the range around that. So the range is represented by the middle 50% of the data set. So it's similar between the TMR and grazing farms, suggesting that there was high performance in both groups. Really just to make the point that feeding system alone isn't going to determine your profitability, there's a range of factors that will contribute to that.

Sheena Carter:

Yeah. And I think, yeah, changing to one system from another system doesn't mean more profitability. Make sure you're doing one well before you try another. Our next slide, this is looking at some key physical attributes of the farms and we know that our TMR farms tend to milk more cows and produce more milk in these systems. Can you talk to how this increased production is impacting or affecting feed costs?

Claire Waterman:

Yeah, that's right. So in terms of the TMR farms, they're getting greater efficiency out of their inputs and so that's contributing to the higher milk production per cow, but it is costing them more to do it. So in terms of that, you mentioned their bigger herds, they're also producing more in terms of that milk production per cow. So they're doing that because they're heavier. So there's a greater live weight in the TMR farms compared to their grazing dairy farm monitor counterparts. They're also getting greater feed efficiency conversion, feed conversion efficiency. Sorry, I got that out. So that's contributing to their higher milk production. They are holding the amount of homegrown feed as a percentage of their diet relatively stable, so around 50% over the last four years, and that's contributing to those higher feed costs.

Sheena Carter:

Okay, so that's quite interesting and obviously our feed costs in all dairy systems are pretty much, they're our largest variable costs so it is something that needs to be managed well and optimised. If we now move to our overhead costs, so we're looking at variable costs and overhead costs as our operating costs, we've got labour depreciation and repairs and maintenance which we're speaking to now. What can you see within the data about how labour use is changing?

Claire Waterman:

So there's a greater demand for employed labour as you move to a TMR system. In terms of their total requirements in a TMR system, it's greater than the grazing dairy farm-honored counterparts. But in terms of that total labour efficiency, they're more efficient and that's contributing to their lower costs. And Tom and Don will talk more about some of those things in terms of changing mindset as a transition to a TMR. So I'm sure there's more to come around that. Some of those things that are changing and labour being one of those

Sheena Carter:

Absolutely. So depreciation is a bit of a tricky one sometimes to get your head around and it's part of a profit analysis. It's obviously not the cash cost and essentially it's representing that loss in value of plant and equipment or infrastructure over time. What are we seeing or what are we, you know, you might have some thoughts about what you'd expect, but what are we seeing with depreciation in TMR farms?

Claire Waterman:

Yeah, so with the transition to a TMR system, we're seeing that the proportion of assets that are depreciating is greater. So around 40% of the total assets on the TMR system is depreciating assets. So things like concrete and steel associated with the shed, as well as plant and equipment to support the feeding system. So a greater proportion of depreciating assets is contributing to a higher depreciation cost for the TMR farms, by around 55%.

Sheena Carter:

Right. And this kind of links on to our repairs and maintenance. Obviously, we've got generally more gear running around and we're seeing an increase in repairs and maintenance costs.

Claire Waterman:

Yeah, that's right. So with those greater capital requirements, we are seeing that there's additional repairs and maintenance associated with that. So things like bedding within the shed, but other shed maintenance as well as repairs and maintenance to those greater capital requirements for the feeding, growing feed, harvesting feed, storing and feeding out. So that's also contributing to a higher repairs and maintenance by about 32%.

Sheena Carter:

Okay, so it is quite interesting to see that shift in cost structure within the businesses. If we move now onto our finance costs, so our interest in lease costs, and just quickly for those, I'll just give a bit of a run through. When we're looking at profitability, we're looking at earnings before interest and tax. After that, we've got to pay our interest in lease costs, debt servicing costs, and there's a few other costs that have to come out as well. But so in Farm Monitor, finance costs are interest and lease costs. And with all this capital investment, there's not too many farms that are funding this purely out of cash flow. So there's, you know, finance costs associated with it. And what are we seeing with the interest costs as a result of this?

Claire Waterman:

Yes, so just before I jump into that, so the capital requirements for the farms, just to give a feel for what the averages look like, in terms of the Northern Victorian sample, so the Northern TMR farms on average, it's around $23 million compared to around $10 million for our grazing dairy farm on the counterparts. So with this transition to a TMR system has been associated with greater capital requirements, with most of this coming from borrowings, as well as some cash flow, and that's contributing to higher interest and lease costs. It's also been a period of rising interest rates, and that's also contributing to a doubling we've seen in the last four years. So from 21-22 to the 24-25 year, a doubling of interest and lease costs. But the grazing dairy farm monitor farms have also been investing in their business, also supported by borrowings and cash flow. So things like land, milking plant, other capital items on grazing dairy farm monitor farms. And they've also seen around a 40% increase in interest and lease costs over those last four years. And in terms of what that means, so every dollar of income, more is going to service interest and lease costs. So within our TMR farms, so every dollar of income they're receiving, seven cents is going to interest and lease compared to around two cents at the early part of the year. So 16, 17, 17, 18, it was around two cents now. It's up to seven. And for our grazing dairy farm monitor farms, it's around six.

Sheena Carter:

Yeah. So, you know, that is a risk that has to be managed in these businesses, any business that's taking on debt. But to me, I think it's a good sign in a way. We've got confidence regardless of feeding system by farmers, confidence in the industry at the moment. So they're willing to invest back in the businesses or expand the businesses. So I think, you know, we've covered a lot in a very short time period, Claire. And, you know, there's lots of key messages that we've tried to highlight. Where can people go for more information?

Claire Waterman:

Yeah, I encourage you to have a look on the Dairy Australia website. The latest report will be up there shortly, but alternatively, come and have a chat to Sheena or myself, or if you're interested to participate, we'd love to hear from you too.

Sheena Carter:

Thanks, Claire. I'll have you as a guest next time. Thank you.

Sheena Carter:

That's all for today's episode of The Business of Dairy. We hope you enjoyed diving into the fascinating world of dairy farming and industry insights. As we continue to expand and evolve, we greatly appreciate your support. Our show is thriving, attracting new listeners each week, but we believe there's always room to grow and we need your help to make it happen. If you've found value in our discussions, we kindly ask you to take a moment to rate and leave a comment about the podcast on your preferred platform. Your feedback not only lets us know what you enjoy but also helps boost our visibility to others who might benefit from our content I sincerely thank you for being part of our community and we look forward to bringing you more engaging episodes in the future with the continued funding and support of the hunt local land services until next time stay curious and keep milking those opportunities.