|What makes a Millionaire Model Dairy Farm successful?|
|Dairy basics - Management|
|Written by Larry Tranel|
This article was #11 in PDmag's Top 25 most-well read articles in 2011. Click here to jump to the article.
A: Dairy producers, like most of us, are no doubt inspired by other people’s success. Many people inside and outside of agriculture feel there is no money in dairy farming, and many dairy producers confirm their thoughts and feelings. Young people think that getting started is just too difficult and often don’t have a long-term vision for what they want financially.
Thus, the success of this “Millionaire Model Dairy Farm” project is due to its inspiration for success; its realization of a lofty goal; and its blueprint budget for how to get there. Also the name piques readers' interest because most don’t think it is that possible to do without the inflation of land prices as part of the asset. So the article gives inspiration, hope, realization and a blueprint with benchmark numbers for how others are making the model work.
In a nutshell, the Millionaire Model Dairy Farms collectively focused on:
1) Labor efficiency
2) Cost effective parlors and facilities
3) Management intensive grazing
5) Semi-seasonal calving
6) Dairy TRANS financial analysis
Labor efficiency is priority one
Labor efficiency begins with the cows and the milking parlor. Model farms typically average around 65 cows per full time labor equivalent (FTE) and average around 1.1 million pounds of milk sold per FTE annually. These are great benchmarks.
Wisconsin data gives a 2:1 labor efficiency increase in a parlor over a tie stall barn; a 3:1 labor efficiency in a freestall barn versus a tie stall barn. There is also a 2:1 demonstrated increase in labor efficiency in manure storage over daily manure hauling. And, there seems to be an increase in labor efficiency on a per cow basis with management intensive grazing, crossbred cattle and semi-seasonal calving (maybe not on a per hundredweight of milk basis).
The Millionaire Model Dairy Farm producers increased their realization over time that dairy cows are employees and that more dairy cows put on a tract of land can increase labor efficiencies for that land and labor unit if there is a labor-efficient milking parlor, feeding system and housing facility.
Labor efficiency hopefully translates into profits. The 2007 and 2009 data show average returns to labor per FTE laborer of $124,045 and $32,397 respectively and labor returns of $41.35 and $14.30 per hour respectively. The large difference is due to large milk price differences in the respective years.
There is a wide range of housing types used, including hoop structures, compost packs and freestalls. The bottom line for cost effective facilities is that cow comfort and dry matter intake is extremely important. Inadequate feeding facilities, lack of fresh air and water and improperly designed freestalls often inhibit milk production and thus profits.
All of the Millionaire Model Dairy Farms feed with Total (or Partial) Mixed Ration (TMR) and have manure storage. Manure storage also plays into labor efficiency. Daily hauling of manure, as is often done with tie stall barns often take twice the labor as hauling with even short-term manure storage.
A most important area for both labor efficiency and cost effective facilities on these farms is a close variation of the TRANS Iowa milking parlor. With low cost, labor efficiency and milker ergonomics in mind, these parlors are often built for $1,000 to $2,500 per stall in an existing barn, which is much cheaper than conventional parlors often at $5,000 to $15,000.
Dairy grazing is governed by five Golden Rules:
Based on personal and research experience, low to no grain programs are not advised in our present dairy systems. Low milk production level herds tend to have high maintenance costs per cow relative to higher producing herds that for those same cow maintenance costs may produce 50 to 100 percent more.
During the grazing season, it is imperative to balance energy needs and not overfeed protein. The energy content of grass tends to be quite variable through the season and lower in mid-summer. Understanding pasture quality, especially energy is important for not only milk yield, but also for reproduction as energy content of pastures tends to be lowest during June (breeding season).
Degradable protein is often not limiting as it is often in excess of 22 percent. Rumen undegradable protein can be an issue without added sources. Thus, sampling pastures for well-balanced rations is a common practice among Millionaire Model Dairy Farms.
Feed quality and quantity is controlled by use of effective temporary and permanent fencing along with good lane and watering systems.
But, all the Millionaire Model Dairy Farms are using crossbreeding with the goal of cows that need less feed maintenance and herd health maintenance along with better reproduction and longevity. Three breed crosses are most advised and retain 86 percent of F1 heterosis. The following data gives credence to their decision, as does an average cull rate between 10 to 20 percent on each of the farms over time.
A Minnesota study of seven herds in California showed survival or longevity improvement. With all crossbreds, 2.6 percent died or were culled before the first milk test. With purebred Holsteins, 8.7 percent died or were culled before the first milk test. For death or cull losses through 305 days, the Holsteins were 15.9 percent and the crossbreds were less than half that at 7.4 percent.
There are many other variables to account for in the decision. For example, crossbreds can recognize an estimated 6 percent reduction in dry matter intake with equal feed efficiency compared to pure Holsteins. This 6 percent dry matter intake reduction (Holstein-Jersey cross) may equate to about three pounds of dry matter per cow per day or about 0.65 ton of dry matter per cow per year.
The cost per cow of feed savings is only about $75, which can compensate for 625 pounds of $12 per hundredweight milk or 3 percent of the milk lost versus pure Holsteins. Thus, some of the lost milk is recovered in feed cost savings. Economic values also need to be put on other traits. So, crossbreeding can be a real deal.
One very profitable model dairy farm at one point was milking once-a-day (can only do with Jersey-based herds) from Thanksgiving through Dec. 23 and then completely drying off the herd until calving started in February. This herd was able to get more than 80 percent of the cows bred in a six-week window. Thus, this producer demonstrated that seasonal herds are possible but a Wisconsin study has shown them to be less profitable relative to year-round milking on a whole farm basis but potentially more profitable on a per hour of labor basis.
Controlling costs and understanding profitability were paramount in their success. In the end, their focus was: 1) Labor Efficiency; 2) Cost Effective Parlors and Facilities; 3) Management Intensive Grazing; 4) Cross Breeding; 5) Semi-Seasonal Calving; and 6) Dairy TRANS Financial Analysis.
Please know not all attempts using this model have been successful. Some dairies using a traditional confinement model have demonstrated comparative profit levels during this same time frame. New and transitioning producers should realize both models can be roads to success. However, the Millionaire Model Dairy Farms may be an easier and lower risk means to attaining financial and quality of life goals. PD