10 Steps to Increase the Profitability of Your Dairy Herd

Thursday, November 20th, 2014

The key to profit on a dairy farm is always a combination of steps and in making decisions and in taking actions in the order of their relative importance.

Let’s leave genetics aside and consider how effective management can contribute to profit. The source for this article is the results from the Ontario DHI project called ROF (Return over Feed Costs). It formed the basis for comparison for producer management clubs run for over the five years prior to 2010. I had the opportunity to run a number of these clubs, where the herds ranged from 50 to 2000 cows. The producer club members set goals and openly shared their results and ideas on how to help other club members improve their dairy operations. Participants were able to increase their ROF for their milking cows by $1.00 to $4.50 per cow per day. On average an hundred cow herd increased their return over feed costs by 0 per day or over ,700 per year.

Ten Proven Profit Builders

In order of their importance to dairy farmers the profit building steps were:

Highest Priority Step

Step 1.: Increase Production Per Cow Per Day
Club members all started by fine tuning their rations which included ration balancing, ration preparation and number of feedings per day. Once production levels increased, they were able to cull low end, problem or non-pregnant cows. Increases of 7-10 pounds of milk and .3 to .4% fat were common among club members. In the end these producers were able to milk 10% fewer cows. That was significant and resulted in increased production being the #1 profit builder.

Very Important Steps

Step 2: Improve Feed Intake
Before joining the club, producers seldom were aware of their cows DMI (Dry Matter Intake). Most herds were in the 44-45 lbs range at the start but after fine tuning and changing, most herds were over 50 – 52 lbs DMI. The old saying ‘more feed in – more milk out’ proved to be very true. Many producers increased the forage percent of their diets from 60% to over 80% and saw significant monetary returns to their bottom lines. Almost all producers changed the varieties of alfalfa or corn grown or how they harvested their forages. Three producers that were either increasing their herd sizes or that were needing to replace their haylage storage facilities went to harvesting their alfalfa as dry hay to save on harvesting equipment costs and to give them less rushed schedules at harvest time. These three were all able to achieve the production they required, they required less labor for harvesting and achieved increased profit. Club members often brought their feed advisors to the club meeting and that helped all club members.

Step 3: Enhance Reproduction
Almost every herd changed their heat detection program. Some did it by staff training, or focusing observation on cows 50 – 125 days in milk (which included re-organizing cow groups) and others did it by purchasing heat detection services or equipment. Some herds reduced average days in milk from over 200 to less than 150. The reduction in average days in milk paid off royally in increased average pounds of milk per cow per day and in reduced number of days in dry pens. Holding club meeting on-farm gave club members ideas on what they should do differently. Veterinarians or reproduction specialists were used as meeting speakers. It was amazing to see how club members picked up on ways to tweak their home reproduction program.

Influential Steps

Step 4: Expand Transition Cow Program
It is every producer’s desire to have cows and heifers transition from dry to milking with ease and without problems. Great success was seen by club members that monitored and recording and implemented a three stage program of far-off, close-up and fresh cow (0 to 21 days) groups. As farms do not run comparisons of transition programs it is not possible to know exactly their increased profit but the saving on calving problems and getting cows well started into lactation were often mentioned by participants as being very important.

Step 5: Focus on Finances
At every meeting there were discussions on how changes club members had made impacted their bottom lines. Participants saw increased profit by: 1) having their crops custom harvested, thus saving on having to invest in machinery: 2) purchasing feed inputs instead of growing them; and 3) by focusing their capital purchases or improvements on items that they used every day or that helped their staff to do a better job. At some club meetings accountants or bank managers were included as speakers and their outside the industry eyes added greatly to the discussions.

Step 6: Re-Work Heifer Program
About 1/3 of club members did a total re-work of their heifer rearing programs. Major benefits were seen in less illness and calving up to 3 months earlier. Many producers penciled out that they saved as much a $400 for every heifer raised.

Step 7: Enhance Animal Environment
The vast majority of members made changes to their facilities or how they handled their animals. Some went as far are making major facility changes. One matter that received considerable attention was cow comfort including both stall design and cow cooling during hot weather. Producers that monitored there before and after cow comfort saw increases of 5 or more pounds of milk per day and improved pregnancy rates.

Other Noteworthy Steps

Step 8: Improve Records / Software / Devices
After participating in the club, members often stated that they had not realized how important good records were for being able to improve profitability. All members had kept breeding and production records but, once they started keeping and using feeding records and linking all records to finances, they were very pleasantly surprised to see the increased profit. A note of caution here. Recording is the first step but the information obtained needs to be acted upon.

Step 9: Increase Labor Efficiency
Labor costs can range from 10 to 20% of total farm costs. The club members that changed to having custom operators provide one or more service saw considerable savings in labor costs. They were able to focus their staff on caring for animals. Most participants reported that they personally were able to spend more time managing, planning and spending time with family, once their operation used labor more effectively and more efficiently.

Step 10: Set Aside Time for Planning / Goals
Participants were encouraged to spend one day a month in planning and goal setting. Many frowned on the need to do that in the beginning. However, after seeing how planning and goal setting helped other club members increase their profits, members freely shared their own goals, plans, actions and results.

The Bullvine Bottom Line

Of course every farm and farm manager operates differently. But in all cases records and data are needed to make the best possible decisions. The ten profit builders provided here can be used as a guide for dairy farm managers to use to set their priorities and make their plans. Few managers want to be average and all want to enhance their bottom lines. Perhaps one club member put it best when he said that, by attaching priorities and using these ten steps, he was able to “ Significantly drive-up his revenue, keep his costs under control and to have a life outside of his farm operation’.