April 1, 2016

VIDEO: First-Generation Farmer Leans On Data For Success

 |  By: Anna-Lisa Laca

As Steve Whitesides walks up the steps of one of the three milking parlors on his Idaho dairy, he hears a machine squawking. He walks over, adjusts the cups and continues explaining how he and his son Derek designed the double-36 parallel, with basement milk metering, to be the most efficient barn on the farm.

It’s just like Whitesides to adjust the machine himself rather than ask an employee to step in. One thing the self-made dairyman will never be accused of is being afraid to get his hands dirty.

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That’s one of the reasons Whitesides has been able to go from simply a kid with an idea to owning one of the nation’s top-tier dairy operations spanning two states and 8,000 cows.

The 57-year-old father of five is part of an elite group emerging as ever-more critical in the U.S. dairy industry, the 3,300 dairy operations with more than 500 cows that collectively produce nearly two-thirds of the U.S. milk supply. As technology and other advances continue to bring economies of scale, these large dairies will get even larger, and smaller operations will have to find their niche.

Even back in 1980, when Whitesides was just getting started, he knew if he was going to be successful, he would need scale and good data to drive all of his business decisions. Wayne Knoblauch, Ph.D., a dairy economics Extension researcher and economics professor at Cornell University, says data-driven strategy is the way of the future.

“To survive the volatility of the dairy market, you must know where you are now in terms of production and financial performance, as well as where you want to be in order to make decisions and plan to attain your goals,” Knoblauch says. “You can’t manage what you can’t measure.”

The Early Days
Growing up on the 400-acre farm his father had homesteaded after World War II, Whitesides always knew he wanted to be involved in agriculture. By 1978, the reality of married life drove him to employment rather than college, and it wasn’t long before the then-19-year-old was working on a neighbor’s dairy.

“I went to work pushing cows and got to pushing a pencil,” he says. “I figured out the revenues [my neighbor] was making and was interested in becoming a dairy farmer.”

But he needed to find a way into the business. That came in a $10,000 loan from his father, which he replaced with an FHA loan to buy 10 cows. His plan? To rent them to his boss for $20 per head per month, on the condition he could keep the offspring. The boss took the deal.

One year later, he had grown his herd to 30 milk cows and was ready to start on his own. It also happened to be the dawn of the PC age. “I spent lots of time figuring out how they could help my business,” Whitesides says.

He bought his first computer in 1980 and started collecting data on his cows and financials. His milking herd had grown to about 120 cows when Mountain Empire Dairies Association, a co-op that has since gone out of business, offered him a quota for his milk. Over time, the quota became worth $50,000 (or more than $150,000 today).

Yet when Kraft Foods offered him the same price for his milk, Whitesides was faced with a dilemma.

“Even though there was some risk involved, I sold the quota and started selling to Kraft,” he says. “No risk,
no reward.”

Knoblauch says dairy farmers who still have quota to sell should look at the price differential projected in the future before taking action, as well as the farm’s financial condition and other market options for their milk before deciding to take on the risk.

Not much time passed before someone offered Whitesides $1,250 per head for his cows. Whitesides sold them, retained ownership of his young stock, paid down his debt and started farming with his brother. That didn’t last long.

“There were two families on 400 acres, and that wouldn’t sustain us,” he says. Soon, Whitesides was milking 700 cows in a double-10 parallel barn. To grow, he built one of the three barns still in use on his Idaho dairy today, and his elder brother Brent became a partner. The East Barn, as they call it, a double-24 parallel, is now used to milk the fresh cows and those in the hospital pen.

Data-Driven Success
While video monitors are common on dairies, video chat not too much. Because technology is ingrained into the culture of Whitesides’ operation, it’s no surprise he uses RFID to monitor his cows, metering systems to analyze their milk production and quality, and self-sorting barns for their entire milking herd.

“I don’t know how to manage cows any other way,” Whitesides says.

High-performing production is what pays Whitesides’ bills. They rely on vertical integration and competent staff to meet a high mark. On the Idaho farm, their fat-corrected herd average is more than 90 lb. of milk per cow per day. They boast a somatic cell count less than 100,000 across most of the herd, and they focus on raising high-quality replacement heifers. Calves are fed a custom blend of whey protein and pasteurized hospital milk, and all heifers are raised on their 5,000-head-capacity feedlot.

Technology is expensive and milk prices are low, but Knoblauch says these kinds of systems have the potential to pay for themselves.

“Milk-data-gathering technology can pay for itself if you can turn that data into usable information to make decisions that will return a profit,” he says. That’s easier said than done.

“At one point, we were gathering so much data we didn’t know what to do with it,” Whitesides says.

In the future, data collection for production parameters will be more technology-driven, Knoblauch says. Farmers will be using more automatic data collection as well as hand-held devices. However, the usability of the data for decision making will have to improve to maintain farm profitability, he says.

Weathering the Storm
In 2008, Whitesides’ brother Brent, who is 11 years older, decided it was time to retire. His son Brandon and a neighbor bought some of his ownership shares, and Whitesides bought the remainder. Together, they purchased 5,000 acres of farmland. It didn’t seem like a good deal at the time, Whitesides says, but looking back, he’s thankful.

“At the time, nutrient management was becoming a bigger deal, and feed was getting expensive,” he says. “I was buying feed for more money than the land costs us.”

Fortunately for the Whitesides, the land purchase provided an avenue of cost control, just in time. Not long after, the dairy crisis of 2009 struck, and dairy farmers across the U.S. lost $10 billion in equity ($150,000 per farm on average) and took on $4 billion in new debt.

“It was the first year I ever lost money in the dairy business,” he says.

The Whitesides came out of the crisis bruised but not beaten, in contrast to many in the dairy community forced to sell out. Yet by 2014, Brandon had decided he’d had enough and wanted out. Whitesides bought the majority of his shares, and his son Derek became an owner, as well. Brandon still works at the dairy as a herdsman.

Aloha to Higher Prices
Once the dairy industry started to recover in 2010, the Whitesides used their business savvy to jump on a new opportunity. They set their sights on dairy farming in the milk-deficit state of Hawaii.

Today, they milk 1,600 cows at their Big Island Dairy in Ookala, Hawaii. Derek helps oversee that facility, and they rely on the farm’s manager and technology. Whitesides says the experience taught them cooperation pays huge dividends: They work closely with the state of Hawaii because much of their land is leased from the government, which is common there.

Whitesides expects to milk 2,000 cows at the Hawaii facility by the end of the year. In addition, the father-and-son duo has a permit to build another milk barn on their Idaho operation.

A career Whitesides admits he didn’t consider until he needed a job turned into a lifelong passion. “It’s been a great ride,” he says. “I wouldn’t change it.”

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