Jul 23, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin


Dairy Talk

RSS By: Jim Dickrell, Dairy Today

Jim Dickrell is the editor of Dairy Today and is based in Monticello, Minn.

Control What You Can

Oct 05, 2009

By Jim Dickrell

In turbulent times, worrying about things you can’t control is just wasted effort. Not only does it do no good, it distracts you from focusing on doing things that can improve your situation both now and for the future.

Tim Swenson, a dairy business consultant with Lookout Ridge Consulting, offered these tips at one of the final World Dairy Expo educational seminars Saturday.

Income over feed cost (IOFC). “Understand what goes into your dairy’s income over feed cost number because it is what is left over to pay all your other expenses,” he says. Make forage production and quality a priority, because it can make a huge difference on your cash expenses and milk production.

Also manage your feed inventories carefully. Do everything you can to minimize shrink. “Now is also not the time to build inventories to have enough feed for two years. You have too many other things you can do with that cash,” Swenson says.

Critically review all discretionary ingredients in your rations. “Don’t rip every additive out of rations, but look at each one and ask why it is there,” he says. “You need to look at profit maximizing rations, not least cost. Least-cost rations can reduce milk and IOFC can actually go down.”

Manage your replacement rate. Identify areas where cows are being “wrecked” on your dairy. “Especially focus on the first 60 days in milk, because you have all the expense of getting cows to freshen but have no opportunity to recover those costs if you lose them so early in lactation,” says Swenson.

At the same time, re-think when you’re culling cows. The old rule of thumb was to cull when milk production dropped to 30 or 35 lb. But with higher feed costs, the breakeven in many herds has risen to 45 lb. If the cow is pregnant, consider early dry off.

“Also treat heifer raising costs as an investment in your future,” says Swanson, “and make sure you’re having that discussion with your banker. He might want you to sell 12 heifers to create $12,000 in immediate cash. But then you’ll have 12 empty stalls next spring that you’ll have to fill.”

Manage labor efficiency. “Don’t expect $8 or $10 per hour employees to manage your herd because you usually get what you pay for,” he says. “At the same time, don’t expect your herd manager to also scrape alleys in his ‘spare time.’ You need to leverage the talents of your current employees.”

Employee turnover also drains labor efficiency. One dairy Swanson works with had decided it would pay no more than $8 per hour for milking labor, but it was constantly having to hire new milkers. It actually cost them more to train new milkers because they needed an extra worker in the pit to do the constant training.

Structure debt properly. “Make sure term debt is amortized over the useful life of the asset,” says Swanson. “If you put a forage chopper on a 20-year note, it can put you in real pickle when it wears out in five years.”

Also consider deferring principal (interest only) when cash flow is tight. But Swanson offers this warning as well: Most lenders are not extending the term of these notes. So when you go back to paying principal, the payments per month will go up to get the loan paid off in time.

Swanson concludes: “There is no silver bullet out there to fix all of this. Make decisions that fit your dairy and your situation. The choices you make now will impact your business for years to come.”

Jim Dickrell is editor of Dairy Today, you can reach him at jdickrell@farmjournal.com.

 

Log In or Sign Up to comment

COMMENTS (71 Comments)

Anonymous
to 2:04 Finaly someone agrees with me. I have been saying the same thing for years. When the CEO's ship the jobs out of this country or hire workers who send their wages out of this country, it is hurting our country. Even the IRS hires people in India to answer the phone when you call while someone in this country collects wellfare.
4:02 PM Oct 13th
 
Anonymous
As for imports, if we continue to import more we lose jobs( not just from the dairy but from all aspects of the dairys' purchases) and we lose a product that is produced here, in the USA, to another country. Good for them, not good for us. We are quickly becoming the next third world country, if we keep giving our resources away it will happen much faster. Also on a side note, funny that the government is sooo worried about the proceessors efficentcy with make allowances. Maybe they should do the same on the farm. We are being told to produce less while our operations are more efficent producing more. We are being told to take the lower milk price and become more efficent , however we are more efficent with a higher milk price. I say this as I watch some of my neighbors, friends and couleges who dairy, do some of the most inefficent things that they can in the name of making ends meet. One is selling heifers for less then it could have cost them to raise them. Why , because their banker told them to do so to MAKE ENDS MEET. Is this efficentcy? I don't think so but it is what it has come to for a lot of farms. Would they have sold them if they weren't forced to? Probally not, esspecially with milk prices looking coming up some. For those of you that think you are insulated from losing money milking cows because you are more efficent,I say think again. How long do you suppose that it is going to take before the proceesors that are currently here in the USA, move across the pond to a place that has cheaper labor, less restrictions and a never ending supply of cheap milk, milk they (the proceesors) may provide for themselves using cheap land and cheap labor in that country. They make the product over there and ship it over here. It is already happening with Nestles', think it won't happen elsewhere? This would eliminate you, no matter how efficent you are. We are losing our industry in this country to another country. I wouldn't feel quite as bad as I do about this if the world were a level playing field, but it's not. Some countries have a average wage of less than a dollar an hour. The workers live in tar paper shacks(literally) and produce a really cheap product. Why? labor is cheaper, land is cheaper, taxes are cheaper, building costs are cheaper, electricity is cheaper and so on. Here in the USA there are a lot of people making minimum wage 7.50 an hour that can barly afford their tar paper shacks(expresion only), yet alone anything else. It isn't a level playing field. Competeing in the world market will never work until it is. I also find it interesting that our government is allowing this to happen while preaching GO GREAN. I don't think shipping our food into the USA is going green.
1:04 PM Oct 13th
 
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions