Is a $15 breakeven possible for a dairy farming business in 2024, given increases in input costs and inflation?
Others may have their doubts, but I am a firm “yes.” In fact, helping dairy farms chisel down their cost of production, increase efficiency and be more profitable is what I do every day.
Here are the six areas I focus on to get that breakeven down to $15 per hundredweight.
Maximizing the parlor: The key to profitability
Money is made in the milking parlor. Ensuring that the parlor runs at full capacity is crucial to achieving profitability. Many dairies fall short in this area by not pushing the parlor to its maximum potential. Often, we get to dairies, and they may be milking four or five turns per hour in the parlor. We try to push that to seven turns an hour. We have some dairies doing even more than that. Getting the parlor up to speed includes efforts to increase the efficiency of cow flow to and from the parlor, as well as the milking crew. I also like to run some groups through the parlor for a fourth milking to increase milk income and cash flow.
Quality feed is king
I can’t emphasize enough the importance of high-quality, consistent feed and its impacts not only on milk production but also on cow health. From metabolic to reproduction issues, some of the most common and costly diseases can be prevented with a good diet. Likewise, I often see “Band-Aid” solutions in the ration that are the result of lapses in forage production and harvesting.
That said, paying attention to planting and harvesting timelines to ensure consistency in feed quality are key factors in reducing not only unnecessary feed additive costs but also the costs of labor, treatments and milk withhold from sick cows.
Reducing expenses without compromising quality
While the ration often contains ingredients we can remove without consequence, it is still very important to maintain quality. Some dairies may cut expenses by reducing corn and protein usage, but I give a heavy caution on this one. These key ingredients are the big drivers of production, and we want to make sure we can get as much milk in the tank as possible.
Labor efficiency: Cross-training and employee focus
To get that cost of production down, there are many places we can cut expenses. However, one area that’s worth investing in is good people. I define a good employee as one who is willing to be challenged to learn new things and become skilled in multiple areas across the dairy, which enhances labor efficiency while maintaining a high level of employee satisfaction. For example, I may teach them how to breed cows and trim feet. Highly skilled employees who are capable of handling various tasks are the most valuable assets to the dairy.
When it comes to managing these good employees, my philosophy is to spend as little time as possible in sit-down meetings. Rather, I prefer to spend time working alongside employees. This approach allows me to gauge employee performance, understand their thought processes and ensure efficient workflow.
Maintaining financial stability and planning ahead
Getting your cost of production down requires planning. A simple way to do that is to set a budget and stick to it. Look ahead and account for potential investments, such as equipment or land purchases, and determine if they are financially feasible according to your budget before making a purchasing decision. I like to focus on cash-flowing expenses as much as possible and avoiding excessive reliance on debt. By keeping a pulse on income and expenses, dairy farmers can weather market fluctuations while ensuring sustainable profitability.
Diverse income streams and staying focused
While diversifying income sources can be tempting, I advise dairy farmers to remain focused on their core business – the cows. Keep your eye on maximizing milk income and achieving financial stability in the primary income stream before exploring additional sources of revenue. I’ve seen plenty of dairies that have lost their footing by diverting attention and resources away from their core operation, compromising their long-term profitability.
What I’ve just shared is my basic approach to helping dairy farms reduce their cost of production and increase their income. By maximizing the parlor, focusing on quality feed, optimizing labor efficiency, reducing expenses without compromising quality and maintaining financial stability, dairy farming with a $15 breakeven is, indeed, possible.
This article is provided for information purposes only. Readers should consult their own professional advisers for specific advice tailored to their needs. Information contained in this article may be subject to change without notice.
