Farm Horizons, May 1997

Twelve trends of the dairy industry

Minnesota agriculture is in the midst of great change and no single facet of it is changing faster than the dairy industry. Faced with a dwindling number of dairy farms and the prospect of losing its infrastructure, the dairy industry is taking a hard look at itself.

Harold Stanislawski, Dairy Development Specialist for the Minnesota Department of Agriculture, has identified twelve trends that are changing the way dairy farmers operate.

1) Limiting capital investment per cow.

Dairy farmers have found that increasing the number of cows but keeping overhead low is the key to profit. Well ventilated, comfortable barns that are full of cows will weather many "price storms" if the cows are healthy and milking well. Dave Galton of Cornell University has found that 3-row barns are the least expensive at $600-$850 per stall. Six-row barns cost $800-$1200 per stall and four-row barns cost $1200-$1500 per stall. Insulation under the truss adds another $80 to $100 per stall. Other low-overhead systems are bedded packs and rotational grazing.

2) Maximizing use of milking centers.

Depending on the original investment, new parlors may be justified if they are used more than 16 hours per day. Farmers are finding excellent facilities that will milk more than 50 cows per hour that are available for less than $25,000.

3) Extracting the most milk for the feed dollar invested.

On many farms, feed costs average less than $5.00/cwt. Even with economical feeds, these cows continue to exhibit high milk productivity and reproduction performance.

4) Ensuring quality roughage.

Farmers have found that the quality and quantity of roughage must take priority over grain crops. Total feed costs are highly correlated with the quality of roughage.

5) Focusing on the cows and purchasing the feed.

Forming arrangements with neighbors to provide the feed is a common practice on larger dairy farms. A good business plan will help to determine if it makes financial sense to add more cows and let someone else grow the feed.

6) Using bunker silos for efficiency.

Traditional tower silos are being replaced by bunker silos on farms with more than 150 cows. Filling and feeding are more efficient with bunkers.

7) Becoming familiar with financing options for expansion.

Using the SBA's 504 Loan Program, Minnesota dairy farmers have added well over 10,000 cows in Minnesota. Other financial sources include: Farmer Mac (Federal Agricultural Mortgage Corporation), the Minnesota Department of Agriculture's Rural Finance Authority and traditional lenders.

8) Purchasing healthy cattle at reasonable prices.

Farmers look for cattle with good health and body condition that are disease free. They maintain herd health with vaccination programs and by forming close working relationships with local veterinarians.

9) Finding farm workers through federal/state training programs.

Government is beginning to train workers for careers on dairy farms. Farmers are finding suitable, well trained help through their local private industry councils.

10) Exploring milk marketing clubs.

With the advent of milk futures, marketing clubs are starting to spring up around the state. Although futures contracts can be profitable, dairy farmers will want to seek advice and become thoroughly familiar with the way these contracts work before they get involved.

11) Exchanging information through discussion groups.

Dairy farmers are meeting to exchange information and form alliances in areas such as labor, equipment purchases and input acquisitions.

12) Moving cautiously on new technology.

Farmers are cautious about adopting "bells and whistles" technology unless they can predict a return on their investment using a written plan.

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