This past year was an economic challenge for every dairy producer in the country. Four brave producers shared the operational strategies they employed in 2009 and the lessons they learned during a producer panel to close out the Vita Plus Dairy Summit on December 3 in Green Bay, Wisconsin.
They included: Scott and Trish Holdgrafer, Bellevue, Iowa; Jim Mlsna, Hillsboro, Wisconsin; and Tejo Willemsen, Frankton, Indiana.
Scott and Trish Holdgrafer
Scott and Trish Holdgrafer own and operate a 425-cow dairy located near Bellevue, Iowa. The Holdgrafers own 260 acres and rent an additional 800 acres while employing four full-time and seven part-time employees. The herd is milked three times per day with a daily production of more than 90 pounds per cow, 3.5 percent fat, 3 percent protein and 150,000 somatic cell count. They use bulls for breeding, feed a one-group TMR and don’t have the fanciest facilities, Scott said.
They have established a good working relationship with the same banker they’ve had since they purchased their first cow. At the end of 2008, Scott and Trish did a lot of prepaying of inputs in anticipation of low milk prices in 2009. This strategy allowed them to better cash flow their business. They also reworked some loans to obtain lower interest rates. However they were still very cost- conscious in 2009 and made changes in their spending habits. For example, almost all of the equipment repairs were done on-farm instead of being hired out.
The Holdgrafers also did much of their own work on an expansion this past year. And, because of the general economic situation, they were able to work with suppliers and negotiate deals, which saved them 20 to 25 percent in the cost of the building.
One area that did not change in 2009 was their philosophy of maintaining high milk production. Their business model has always been to optimize milk production while maximizing income over feed costs. Moving forward, they feel it is time to work closely with a milk marketing adviser to try to avoid the low “lows” of the milk markets.
In next three months, they hope to regroup, build milk production and work on a milk marketing plan.
Jim Mlsna owns and operates Ocooch Dairy located near Hillsboro, Wisconsin. Ocooch Dairy milks 600 cows three times a day. Fresh cows are milked five times a day, which is a big advantage in less mastitis, greater intakes and better fresh cow observation. The herd is producing 27,000 pounds of milk, 3.8 percent fat, 3.05 percent protein and a 200,000 (and dropping) somatic cell count.
Ocooch Dairy owns and rents a total of 1,150 acres of land and employs 13 people. Jim’s three children – a son and two daughters – are all involved in the operation and each has a specific role in the daily management of the dairy.
In 2008, a state-of-the-art, double-12 parallel parlor was built to replace an old flat barn parlor to improve labor efficiency and working conditions. This new parlor allowed the dairy to eliminate two full-time workers and provides closer monitoring of cows.
Also in 2008, Jim contracted milk (but not enough) for 2009, which allowed for better cash flow. The farm hires a financial manager to calculate the price of production each month. A year ago, that cost was figured at $17.50. Jim said he instructed his broker at the time to lock in milk to protect the $17.50 cost. Instead, the broker was more interested in grabbing $25 milk in lieu of $20 milk and didn’t lock as much in as Jim would have liked.
“I fired him and got a new one,” Jim said. He still has some milk covered through June of 2010, about 40 to 60 percent locked at $14.50, for insurance. “I will not quit marketing,” Jim declared. “I just hope I can learn more about it.”
All input costs in 2009 were closely scrutinized and no new purchases were made. Jim also reduced sand usage and eliminated employee translator services to cut back on costs. They switched to a daily manure haul system to reduce the cost of a custom hauler and saved $15 to $20 per load of manure. Employees stopped receiving raises, which they were more in favor of than to see anyone lose their position on the farm. Each family member started milking cows four hours per week to help offset labor costs.
“I started milking cows again,” Jim said. “With my kids on the payroll it’s hard to get them to understand what it’s like to be broke. There’s something different between owning it and doing it.”
Some of the things Jim learned this past year include:
• You can’t cut feed costs to save money
• Stay focused on growing quality forages and having enough land base to do so
• Challenge suppliers to negotiate supplies and services
• And, stay positive. “We don’t do it for the money,” he said.
Tejo Willemsen owns and operates Willemsen Dairy, LLC located near Frankton, Indiana. Willemsen Dairy is a 1,700-cow dairy, milking three times per day with a rolling herd average of 23,000 pounds of milk, 3.6 percent fat and 3.05 percent protein. This dairy business farms a total of 1,800 acres and employs 16 people.
In the fall of 2007, Tejo received permitting approval for 6,000 cows and started the expansion process. All of the major excavation work was completed prior to winter, including the feed and manure storage systems for the additional cows. In the winter of 2008, the decision was made to put the expansion on hold due to the sharp increase in commodity prices. However, the dairy had built additional feed inventories and is still feeding 2007 corn silage and 2008 haylage, which resulted in no cash forage expenses this year.
“If I had expanded, I probably wouldn’t be here today,” Tejo said.
Due to the economic downturn, Tejo regained management of the dairy after being sidetracked with the expansion. He is also spending more time with his bankers, suppliers and vendors.
“As of today, I haven’t missed an interest or principal payment,” he said. “I went first to vendors to work with them before going to the bank.”
Tejo remained focused on himself and his family, keeping the relationship with his banker and watching the cows and his herd, as that is where the money comes from, he said.
He did end up cutting payroll by 30 percent. His employees took it rather well because each month Tejo shares his income statement with them. He also shares how much money he takes from the dairy and revealed that he, too, took a 30 percent cut in pay.
Tejo remained positive by staying professional and calm; enjoying the important things in life, like family; and looking on the bright side.
Moving forward, Tejo said, “The sky is not the limit anymore. I have learned my lesson. Once in awhile you need to listen to your mother and put your money in an old sock beneath your bed – because you’re going to need it one day.” PD