Cl2-Lancaster Farming, Saturday, June 1, 1991
r
i
F
A
R
MANAGEMENT
DAIRY FARM
PROFITABILITY
Alan Strock
Farm Management Agent
Penn State
Editor’s note: This is the first
of an eight-article series written
by the four southeastern/central
farm management extension
agents. The column will cover
various farm profitability and
efficiency measurement tools
and ratios.
With the current milk price at
the level it was five years ago,
most dairy farmers are concerned
about farm profitability and survi
val measures.
This article will offer ideas and
yardsticks (a standard or average)
against which to measure your
farm. From these benchmarks you
may more easily recognize a profit
leak and take steps to correct it
Size of Operation
To return a satisfactory profit, a
farmer must generate sufficient
income in relation to their
investment
Size of the dairy has a positive
correlation with profitability,
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LANCASTER, PA 17603
(717) 393-5807
Route 30 West at the
Centerville Exit
Designers of Quality Systems for Poultry, Swine and Grain Handling
according to the “1989 Pennsylva
nia Dairy Farm Business Analys
is” and the “New York 1989 Dairy
Farm Management Business
Summary.”
Farms of 200 or more cows had
substantially more net farm incom
e than smaller farms. Profits per
cow, however, seem to maximize
at the 120 to 150 range. In 1991,
these profits ranged from $492 to
$548 per cow. Larger, well man
aged farms usually earn more pro
fit than smaller units, because lar
ger farms:
• Spread overhead (fixed) costs
over a greater volume of output.
• Produce more units on which a
profit is made.
• Allow for more specialization
and efficiency.
But this does not always hold
true, because some larger farms
aren’t well managed. Larger size
in itself never guarantees larger
profits. Managers must maximize
their management skills at their
present level before they move to a
larger unit with more resources to
manage.
Production Per Cow
Production per cow also has a
very high correlation to net farm
income. The table below, taken
■w-d
from the “1989 Pennsylvania
Dairy Farm Business Analysis,”
shows how production per cbw is
closely related to profit.
As with size of operation, bigger
is not always better, but well
managed, higher producing herds
have a greater chance to return a
higher profit.
Let’s look at five of the factors
which strongly influence dairy
farm profits.
Feed Efficiency
Total value of feed fed the dairy
herd is usually the dairyman’s
largest single expense. We would
like to see this total not more than
$8.50 to $9.50 per cwt. of milk
sold.
Other goals might inclhde pur
chased feed and crop expense per
cwt. of milk sold $3.50 to
$4.50; purchased feed per cow
$450 to $650; and purchased feed
—l5 percent to 30 percent of milk
sales.
Be very careful setting your
goals, because the benchmarks
above may be too high or too low
depending upon the resources
(land, labor, and capital) which
you have available. It is most
important to calculate these mea
sures annually and look at the
trends of your business
management
These factors will be strongly
influenced by the amount of home
grown versus purchased feed, and
the level of milk production of the
herd. If feed costs are consistently
high, look at contributing factors
such as poor forage quality, poor
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*’i of milk >old Labor coat per Mach, expense Net farm income
per cow cwt of milk per cow ner cow (Profit!
<12,000 3,38
12.000- 3.50
14.000- 3.27
16.000- 2.39
18.000- 2.95
20,000> 2.96
yields, unbalanced rations, insuffi
cient or inefficient grazing, paying
too much for feedstuffs, not
double-cropping enough, feeding
the replacements and low produc
ers luxury feed, lengthy calving
interval, or raising too many
heifers.
Labor Efficiency
Dairy farming is labor
intensive, and wise use of labor is a
key to higher profits. Good analys
is factors to use incomparing your
farm against farms with similar
physical resources are: 600,000 to
900,000 pounds of milk sold per
worker (3,000 man hours); 32 to
45 cows per man equivalent; and
$15,000 labor and management
return per worker.
Labor efficiency must always be
viewed in relation to investment
per worker. Those farms with
many labor saving devices should
expect higher labor efficiencies.
Dairy farms that purchase all their
feed or farmers that do very little
field work should expect higher
pounds of milk sold per worker.
Herd Health Efficiency
Herd health expenses and prob
lems can make or break many
farms. Veterinary costs per cow
(goal $45 to $65), heifers per cow
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111
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BEILER
HYDRAULICS
(goal .65 to .80), and cowtumover
percent (goal 20 percent to 35 per
cent) are three very critically
important measures of herd health
financial efficiency.
Higher producing herds will
almost always have higher veterin
ary cost per cow, but health costs
can eat away at the profitability of
these higher producing herds.
However, many dairymen do not
practice enough “preventive main
tenance” monthly herd checks,
regular hoof trimming, and pre
gnancy checks.
Unprofitable cows should not be
kept. But normal culling rates
should be reduced if net cost of
replacements is high and profit
margins are low. Increase culling
rates if cows need to be removed to
make room for genetically super
ior cows, or if cows are merchan
dised at higher prices for breeding
purposes. Keep records of why
cows are culled.
Breeding problems have forced
many farmers out of the dairy busi
ness and cost many more thou
sands of dollars. Days open after
calving should not exceed
100-110; calving interval 2.5 to
13 months; services per concep-
** -. < M
'£*& r i-
a
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0 •*
391.00 332.76
459.00 355.94
491.00 528.37
507.00 572.00
555 00 629 75
619.00 681.24
Herd Breeding
Efficiency
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