Optimum dairy farm income is possible only when adequate resources are coupled with capable dairy farm management. Recent decreases in milk income and increased volatility of feed prices along with the financial crisis has forced us to make decisions that provide economic flexibility to our dairy operations. Getting back to basics is always a wise idea during tough economic times. What follows is a discussion of the top 10 basic management areas to focus on for dairy profitability.

  1. Forage Quality. Cows are ruminants and as such, forage quality is of utmost importance. Forages are the cheapest source of nutrients available. As forage quality increases there is a decreased need for energy and protein supplementation, the health and reproductive efficiency of the cow improves — all of which have a direct impact on the bottom line.
  2. Get Cows Pregnant. Getting cows pregnant and giving birth in a timely fashion (every
    12-13 mo) directly impacts milk production and the bottom line. Cows that get pregnant faster will spend more time in early lactation and have a lower risk to be culled for poor reproductive performance. Synchronizing management practices to optimize milk production and reproductive performance will optimize economic returns.
  3. Improve Feed Efficiency. Feed efficiency is a measure of converting nutrients into animal products (milk and/or meat). Properly balanced rations increase productivity while minimizing wasted nutrients. The most digestible portion of the diet is the one composed mostly of grains and grain by-products. Thus, total diet digestibility is greatly determined by forage digestibility. Wasted nutrients have a negative impact on the environment and the dairy operation’s bottom line.
  4. Focus on Cow Health. The most profitable cow is a healthy one. We all are too familiar with sick cows or problem cows that use up our energy, time and resources and decrease our bottom line. Most cows are culled in the early part of the lactation, so a top transition management program is a must. A good place to start is to improve rumen health with the use of high quality forages as part of a properly balanced diet.
  5. Maximize cow longevity. Longevities of 3 lactations per cow or less are no longer acceptable. Increasing cow longevity allows us to dilute the fixed costs (facilities and equipment) and the cost of rearing replacements for the cow while maximizing their productive life. Also, it has been estimated that reducing culling rates by 1% results in $25-35/cow/year added to the bottom line.
  6. Maximize Cow Well Being. We hardly gain anything if we feed the cow well, get her pregnant, care for her health but overlook her overall well being. Make sure cows have adequate, dry, clean spaces for eating, drinking, resting and exercising including adequate ventilation. Remember that overcrowding has detrimental effects on cow health and economic performance of the operation.
  7. Focus on Income over Feed Cost (IOFC). Feed cost is the largest variable cost of milk production and thus the most important variable in managing profit. During tough economic times it is very tempting and convenient to throw this concept away and focus exclusively on the cost side of the equation. Our job as managers is to maximize this number when we are on the positive side and minimize it when we are on the negative side (ie. when costs are higher than income).
  8. Minimize Fixed Costs. By minimizing fixed costs, you can allow your variable costs to contract or expand according to economic conditions. Do you have the right equipment? Can you lease or do you have to buy? Should you own or lease the cows? Should you own or lease the milking parlor? What would it take to have variable number of stalls in the parlor? Do you need to own the combine in the shed? Optimize your resources.
  9. Focus on Your Loyalty to your Employees. Most of the time we are concerned about employee loyalty. However, employees are concerned about their employer’s loyalty as well. Do we have the right relationship with our employees? Are they properly trained, treated and compensated fairly? Employers need to realize that in order to promote company loyalty, they need to help their employees advance to find new jobs within the organization.
  10. Be a Leader in Environmental Stewardship. More than ever, today’s dairy business and the environment are tightly linked. Those successful in the dairy business know it very well. What can you do to control odors or insects? Can you improve air quality and manage water differently? The dairy industry needs to reach out to their neighbors and go beyond compliance.

When dairy economics are good, it is easy to slip into bad habits and make poor decisions. We must get back to basics to ensure profitability in the dairy business.

For more information, visit www.chr-hansen.com.