2. Cow Comfort. While we cannot prove it yet based on the data we've collected (yes, we are working on it), cow comfort has been identified as a critical profit factor when looking at other summaries and sorts. Some preliminary research I have done has shown that the variation in feeding efficiency (as measured by adjusted feed expense per cwt. milk sold) was caused more by variation in milk sold per cow than by adjusted feed expense per cow. This means that variation in the response (i.e. milk per cow) was more important than variation in the per cow feed expense. This has broad implications on cow comfort and is supported by causal observations. Most of the time this investment is relatively inexpensive (a few fans, water, a pond, etc.) and the returns are almost immediate. Now is the time to put the equipment in place or move some dirt so that it is in place when the real heat arrives.
3. Cull Rate. Any time I see a great amount of variation in a number, I want to understand what is causing the variation and if the variation is important. In 1998, the cull rate ranged from less than 30% to in excess of 60% on project dairies in Florida and Georgia. While the price of replacements may be down slightly from recent high levels, excessive cull rates have broad implications on overall profits that have been demonstrated by looking at actual performance (see cull rate articles on project website). While the results of controlling excessive cull rates may not be immediately realized, having that extra cow milking over the summer or calving this fall rather than having to purchase it may reap dividends down the road.
4. Feed Shrink. This may not apply to everyone, so please bear with me. As you are filling your silos with the first crops of 2000, do whatever you can to ensure that as much 'feed' as possible makes it into the cow and not fall away unutilized. Lost feed, or shrink, is a direct profit write-off in the form of unrealized revenue or shrink. Again, I have seen a great deal of variation in the quality of silage stacks. Shrink around the commodity barn should also be addressed since the ingredients that are lost in this area are often of higher per-unit value. The visible form of shrink may be easy to deal with. However, the 'invisible' mycotoxins and alflatoxins have greater implications on dairy profits as they can directly impact numbers 1 and 3. Almost all of the observations point to addressing feed shrink on your dairy.
5. Labor efficiency. This may be the one area where savings may be immediately realized. For those businesses that participate in the Dairy Business Analysis Project, two labor efficiency measures are calculated and compared, cows per worker and milk sold per worker. Increasing cows per worker (increasing number of cows, decreasing number of people, or both) will have immediate impact on expense levels and efficiency. Increasing milk volume per worker will also increase efficiency but not necessarily decrease expenditures. Now is the time to seriously evaluate labor structure and needs if cash flow ability is tight.
6. Feeding efficiency. Calling all nutritionists, now is the time to make a big difference on the bottom line of your clients. For those dairies with feeding efficiency problems, adjusting the ration to reduce per cow feed expenses while maintaining or increasing per cow production levels does volumes for profitability. Again, variation in the information we have collected shows a large amount of variation in adjusted feed expense per cwt. milk sold (ranging from less than $6.00 to in excess of $12.00) so I know that there is some wiggle room out there. Some are fans of quality forages. Increasing cow comfort is also a big factor in improving feeding efficiency. Whatever your strategy, increasing feeding efficiency will pay immediate and long term dividends for your dairy.
7. Risk Management. While it doesn't make much sense to enter the markets right now, it does make sense to prepare your business for active milk price risk management. I know of several dairy managers that have used the futures market, hedged some milk, and have secured a profitable milk price for the next several months. The first step of hedging milk is knowing your cost of production (unabashed plug for enrolling in the Dairy Business Analysis Project). The second step is setting a desirable return to management (i.e. profit). Then secure a knowledgeable broker and work with your lender to secure a source of financing for margin calls and/or option premiums. Remember, the futures market allows you to transfer the risk of milk price to the futures market, reducing your price risk and ensuring a price for your product. Now is the time to climb the learning curve, make the contacts, and put the risk reduction machinery in place. If past performance is any indication of future results, it will probably continue to be a volatile milk market.
Decisions made today will directly impact the level of profits achieved tomorrow. Successful dairy management and profits have always been linked to effective cost control and business growth. Positioning your business to increase the level of cost control and improve in the above areas will facilitate survival of certain volatility. There are probably other areas that apply to your specific business that may have a greater impact. However, enhancing performance in these general areas will improve almost any dairy business focused on enhancing profitable operations.
[1]Contributing authors include R. Giesy, M. Sowerby, P. Miller, C. Vann, A. Andreasen, T. Seawright, P. Hogue, University of Florida, Cooperative Extension Service. Also, L. Ely, Department of Animal and Dairy Science, University of Georgia.
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