Lesson Learned From 489 Years of Dairy Farm Records
If you’re going to go through the hassle and expense of keeping records, you might as well learn the lessons all this data gives you.
Steve Bodart, a senior dairy consultant with Compeer Financial, along with analysts from Zoetis have worked with 93 Midwest farms since 2006 to determine what factors help fuel profitability. To date, there are 489 years of farm records in the data set.
I’ve reported on this on-going study several times over the last decade. But as we enter a new year with guarded optimism for better margins, I thought it would be good to review the lessons offered by all this number crunching.
Herds in the study averaged 1,087 cows. One herd with 95 cows provided one year of records. The next smallest was 400 cows; the largest, 4,700. Participating herds are located in Ohio, Michigan, Wisconsin, Minnesota and South Dakota.
Lesson # 1. Never give up milk. If you have ever attended an Extension dairy meeting, this lesson is a recurring theme. Bodart’s analysis bears this out: More energy corrected milk per cow is profitable. The most profitable herds averaged nearly 93 lb of energy corrected milk. The least profitable averaged twenty pounds less. The impact was 89₵/cwt of more net farm income on all milk.
When milk prices fall, it gets worse. “We get to a year of lower milk prices, and we let production fall,” says Bodart. “We cheat on expenses, but our expenses go down a lot less than our revenue goes down.”
Lesson #2. Keep herd turnover low. “We find that herd turnover cost is the highest correlation we have with profitability of the herd,” says Bodart. Net herd turnover is the number of adult cows that are culled, died or sold for dairy. The cost is calculated by looking at their balance sheet value less their salvage or sale value.
Herds with the lowest net herd turnover cost (NHTC) average a cost of 91₵/cwt. Herds with the highest have a NHTC of $1.99/cwt.
The impact on net farm income is even higher, with the difference between the low and high NHTC herds being $1.44/cwt. The reason: Herds with low turnover are milking more three-, four- and five-year-old cows, which produce much more milk than springing heifers. In total dollars, the impact is huge: $375/cow in the herd for a total impact of $409,000 for the average herd in the study.
Lesson # 3. Focus on milk quality. The best herds in the study have an average somatic cell count (SCC) below 135,000 cells/mL. The worst are more than double that. The difference in net farm income/cwt is 64₵. SCC is also correlated with fertility and 21-day pregnancy rate, death loss and herd turnover.
“We know people don’t like high cell counts, so they’re turning cows. As the cull rate goes higher, profitability and energy corrected milk go down,” Bodart says.
While the new year brings promises of cautious optimism, significant volatility on both milk prices and input costs will continue. Focus on margins. Never give up milk. Keep as many mature cows as you possibly can. And make milk quality a top priority.
For more on Bodart’s presentation, go to: https://worlddairyexpo.com/pages/Expo-Seminars.php