In the U.S., we are always on a quest for “bigger” — bigger houses, bigger cars, and bigger spending accounts. America’s dairy industry hasn’t been immune to the “super-sized” mentality. For years, the industry has been pushed to grow, with the average herd size in the U.S. growing from 75 cows in 1992 to 179 cows in 2011. Producers worked to capture economies of scale by focusing on adding more cows with limited land resources and purchased inputs.
This model is changing. As land values and feed costs have skyrocketed in the past couple of years, more and more producers are saying “I do not want to grow; I just want to get better where I am at.”
In fact in a recent survey the Center for Dairy Excellence conducted among Pennsylvania dairy producers, less than 10 percent rated increasing their herd size within the next five years as important to their business model. In contrast, nearly 70 percent rated both maximizing homegrown feeds and decreasing production costs as very important.
This survey is part of a larger project that the center has undertaken with the University of Pennsylvania, Saint Joseph’s University and Penn State Extension Dairy Team to conduct a comprehensive “Pennsylvania Dairy Futures Analysis.” The results of this analysis will be available in March. It will include a comprehensive review of the dairy production, processing and consumption trends in Pennsylvania and what interventions are needed to strengthen the state’s dairy industry.
Pennsylvania is unique. The average herd size in the commonwealth is around 75 cows, while the nation’s average herd size is 179 or more cows. Farms in Pennsylvania are diversified, with many growing enough crops to supply all or most of the herds’ feed needs and, in good years, benefit from cash grain sales. While the smaller farms haven’t been able to capture the economies of scale that the larger ones have historically, they have been protected from the market volatility and increasing feed costs that have plagued the industry in the past two years.
What we have found in our analysis is that smaller dairy farms can be just as a productive as larger farms on a per-cow basis. In fact, according to Dairy Herd Improvement (DHI) records, there are herds under 100 cows achieving similar milk production levels as the highest producing 500-cow herds in the state. With thousands more herds in the less than 100 cow category than in the greater than 500 cow category, the lower producing herds in the smaller herd category pull the average for that size group down to nearly 4,000 pounds below the average for the larger herd sizes.
At the center, we have two goals. One is to help all Pennsylvania dairy farm families, regardless of their herd size or management philosophy, improve the profitability of their dairy business. The second is to grow Pennsylvania’s dairy industry. Our industry analysis was clear in showing us that we can grow Pennsylvania’s dairy industry faster and more efficiently by helping farms increase their milk production per cow and “get better where they’re at” than we can by encouraging farms to grow herd size.
In fact, the 2011 Northeast Dairy Farm Summary produced by Farm Credit East has shown the cost to add a million pounds of milk production by increasing herd size is nearly double compared to increasing milk production per cow.
So, regardless of herd size, what does it take to “get better at where you’re at?”
In Pennsylvania, dairy farms can leverage resources from the center to identify areas where they can improve. The Dairy Decisions Consultant and Dairy Advisory Team programs are probably our two most valued resources.
Guidelines for 2013 have just been released for both programs, with up to $1,500 in funding available to help individual farms to establish a dairy profit team and up to $1,500 for farms to work with an outside consultant to identify opportunities to improve farm profitability. Farms enrolled in these programs range in herd size from 40 cows to more than 800 cows.
Even if you don’t use the center’s resources, every dairy farm family has to look at their business and evaluate how they can improve. In today’s volatile dairy industry, three things essential to “getting better” include:
Increasing your productivity and efficiency. Ask yourself what it would take to add five pounds of milk per cow per day, or how you could lower your production costs by $2 per hundredweight. Then identify steps to get there.
Managing your risks. All farms have to manage price swings in today’s volatile marketplace. Whether it is by building a rainy day reserve fund or by using dairy risk management tools, make sure you’re prepared for the next milk price valley.
Having a business plan in place. It is much harder to get somewhere when you do not have directions. A business plan is what can help guide your business to the next level, and it can be a tool to identify potential obstacles and solutions before they’re at hand. Ag Bankers continue to tell us at the center, “we aren’t interested in working with families who do not have a plan, and the ability to explain the plan to us”
We at the center want to be a resource for dairy farm families in Pennsylvania. We believe stronger, more profitable individual dairy farm businesses lead to a stronger, more productive dairy industry, and we want to help all dairy farms reach their business goals.
If you have a dairy farm in Pennsylvania and haven’t contacted the center before, give us a call and find out how we can help your dairy. You can reach us at 717-346-0849 or by emailing info<\@>centerfordairyexcellence.org. Or visit our website at www.centerfordairyexcellence.org.
Editor’s note: John Frey is the Pa. Center for Dairy Excellence executive director.