*Extended comments are highlighted in blue.
Reducing the risk associated with dairy farming has many facets. Risk related to milk prices, input costs and cull beef prices all goes directly to the bottom line.
Other risk related to operational processes, labor, breeding, herd health, genetics and nutrition all can represent serious losses if things go wrong. Some catastrophic losses can be mitigated by insurance; others can be controlled by hedging or contracting. Basic management strategies offer the best options for controlling most of the day-to-day risks in dairy farming.
Feed cost and a reliable supply are the largest economic input risks. Recent commodity prices have put feeds at the top of the input cost list, especially for those who are purchasing their forages and concentrates.
The alternative is to strategically include the production of your feeds as part of your farming system. The economic model of including the production of forages and feeds as part of your farming system has many advantages to improve the overall sustainability of your dairy business.
First, it is an automatic hedge against the impact of changing commodity prices. Second, it allows you to take advantage of the recycling of nutrients that otherwise become an environmental liability. Third, it allows a diversification of your farming system by being involved in alternative enterprises.
In the past, specialization in producing milk has been economically attractive. However, in the long term, it has exposed farms to many risks that originate beyond the farm gate. The benefit of being a broader-based operation is that some of the risk is reduced or brought under the umbrella of your management systems.
As the farm needs to grow, diversification into additional input activities such as additional feed production, heifer rearing, dairy beef production and even some of your own feed processing may provide opportunities for improved profitability and sustainability.
The downside is that as you diversify to add or broaden your production base, you assume more and different risks. The opportunity is to bring those risks under your management control. There are several areas that you need to be aware of in order to take full advantage of the opportunities:
• Focus on producing high-quality forages. Grains for concentrates can be a primary or secondary focus. For example, extra acreage for corn silage can be used as grain, or plan to plant some acreage as grain corn that will be available for silage if yields are low.
• Harvest and storage must be timely and done properly. Having the right equipment and manpower or an unquestionably reliable custom operator is very important.
• Effective inventory control starts with crop planning. The right acreage and crop mix is a multiyear planning process. Herd changes needs to be correlated with crop production.
• Nutrition planning needs to be correlated with the mix of crops you grow. Planned changes in nutritional philosophy will require some lead time to implement.
• The varieties you choose will have feeding implications. Modern forage varieties have a wide choice of feeding characteristics.
• Grain handling also has feeding implications. High-moisture, dry, processed and ground grains are all different nutritionally.
• “Growing your own” forces you to put crop decisions on the same level as decisions related to the management of the dairy herd. Viewing crop production as secondary just does not work.
• Efficient crop production requires the input of a good employee team and the opportunity to use well qualified consultants.
- December 2010