Old dairy farming Truths

I was talking with a gentleman a week ago who used to have a dairy. I remember reading a piece around a dozen plus years ago that I thought summed up the situation rather well. By the way I don't remember it word for word or where I read it. Basically the idea was that by 1990 it was no longer just about good management. By 2000 it was no longer about good management or low debt. By 2005 it was no longer about good management or being debt free. If had to guess what today's notion is that would be it is no longer about sufficient resources. If you do not have land resources or cow genetics to put you in the top ten percent in terms of production you are at a disadvantage. This does not overly address the economy of scale but I would'nt wonder that the large operations are held to the same "rules" as the smaller guys. Any thoughts?

It reminds me about a story told about a neighbor back where I used to live. It seems that after going off to ag college he came home with a lot of great ideas that he wanted to put into practice. It is said that one of his experiments was when he had a horse and each day he fed him just a little less. But just when he got the horse to where he fed it nothing, the horse up and died on him.
It seems that this story parallels the way dairy farming is today. Lots of advice on ways to cut back on inputs but not on income. That horse is not going to make it either.

Just off the top of my head would say cost per hundred weight, some people have an advantage with that with farms paid for or other things, the other seems to be the investors that have come around here, had one told us he makes money by losing money on the farms. Meaning he has his main businesses then use the farms to lose money to take tax breaks.

As far as taxes, they still don't take 100%. So if his dairy loses money he make more on his main business and at end of year he has more money in his pocket? Why not just lose the money on the main bus. and not have the work and hassel of running a dairy? Or better yet why not lose all the prophet from the main bus? At end of year he would really end up with lots of money in pocket right?

I figured this thread was for truths like " The chance of being struck by the tail rises exponentially with quantity of fresh manure on said tail..."

Production of crops figures into cost per hundred weight. Some soils have better natural releases of P & K into the topsoil. Some soils allow for better root development. If a soil on one farm produces 35 tons of corn silage per acre in a given year and another farm down the road with the same growing season produces 27 tons of corn silage per acre with the same inputs the corn silage per ton cost less on the high yielding field versus the lower yielding field which would have a direct cost on a per hundred weight basis. Both fields would have been exposed to the same management techniques but one field's soil was inherently more productive than the other. The guy who in the best case scenario that produces 27 tons of corn silage per acre is at an disadvantage to the farmer who can produce 35 tons of corn silage per acre.

They don't run them, they have operators to do that for them.

Absolutely right. Guys with a farm paid off by previous generations will have the biggest initial advantage of any I am aware of.

Isn't that why Lylehaven was started to give the Rapapports tax credits?

Initially, and years ago that is correct. Today not so much. Around here there are farms at their management best that can make maybe 3/4 of what the top operators can make in terms of tons of corn silage per acre or tons of hay (dry basis) per acre. It's not enough anymore even if you are debt free. The point is that for a lot of farms the land and cow resources are not enough to make it when milk is 15-16 dollars per hundred weight not figuring fat and protein bonuses in.

I am not familiar with dairy, but am aware of the very thin margins to be had in that industry. I do see your point with land resources. In Illinois, where I am, you can see the most beautiful black soil for miles and miles. A section or two away from those prairie fields, where our farm is, you have what we call timber soil....white clay which there is no in between wet and dry. Miserable dirt....Not complaining, but agreeing to your point of different land resources between farms making the difference. Never been to NY, but spent time in PA...I remember a wide and varied soil type in that area.
Take Care!

Cost of production rules... no different than raising corn or anything else. Yes, land productivity will vary, but it doesn't affect total profitability of a dairy very much. If it did, you'd see a lot more dairy farms left in the corn belt. Better land is usually more expensive, and so carries a higher cost- more rent, more debt, etc. Nice if paid for, but there are opportunity costs then ,too.

Cow care is important... a herd that can sell replacements in excess of its needs year in year out will have an income advantage over somebody who always is buying a cow or two to keep the barn full. Dead cows are a great way to increase ones "replacement cost."

Productivity is another area that lowers cost. Within a management system, a herd that ships more lbs of milk per cow (or fat per cow) has more units sold to spread fixed costs over. If they are able to manage their expenses, they will outperform a low producing herd.

Or one could use really low fixed coss in a grazing system to make things work.

Cost of production is also of course affected by debt structure, cost of living, machinery buying habits, repair costs, etc. Austerity gets you a little of the way, productivity with what you've got gets you further. Risk management gets you further yet. Those confident enough in their costs can lock in a good price for a year or more in advance. Yes, they may miss some better times, but if they lock in a profit, they are at least gauranteed a good (or at least decent) time.

Big gets you nothing if your costs are high... zero times a 1000 is still zero. Economies of scale can work, but they go the other way, too.