By Mark Mapstone
Achieving high production efficiency comes down to removing nutrition, herd management and cow comfort roadblocks that hinder a cow’s ability to produce milk efficiently.
When I asked dairy producers to reflect back on 2012 and evaluate the year in terms of financial management difficulty, it was interesting to see producers tended to gravitate to one side or the other. Very few producers rated it as “average”. I was very puzzled by this, because the 2012 Dairy Farm Summary reported that despite record high input costs in the industry, the average farm’s net earnings of $415/cow were above the 5-year average.
But after studying individual farm data, I realized why so many responses were polar opposites: The difference between the operations rating the year as above-average and those rating it a below-average had a lot to do with their level of production efficiency.
Production efficiency is a measure of how effective you are at converting raw materials (your variable inputs) into finished product (milk). Variable inputs include labor, feed, crop, livestock, fuel, custom hire, heifer board, marketing and other variable expenses. Production efficiency is measured by gross margin (milk revenue –variable expense = gross margin).
Production efficiency is a relationship between your input costs and the level of production. Dairies able to keep variable expenses per cow low, but achieve higher-than-average levels of milk shipped per cow, achieve high production efficiency.
Production efficiency drives profit
There is generally a lot of buzz about production efficiency, but the producers who are able to achieve it benefit on their bottom line. As we see in the 2012 DFS comparison (see table), higher levels of production efficiency can have a big impact on cash flow and profitability. There was a $1,257/cow net margin spread between the top 25% farms ($939 net margin/cow) and the bottom 25% (-$318 net margin/cow). Of that $1,257 difference, production efficiency represented $1,118 (88%) of the difference in bottom-line profits.
The 2012 DFS information shows this very clearly, with the top 25% profit group shipping 2,657 lbs. more milk per cow ($480/cow more in milk revenue) than the bottom 25% group, while spending $214 less/cow on variable costs. Higher production with lower input costs is the main driver of the profitability between the top 25% group and the bottom 25% group.
Better efficiency: Where do I start?
Achieving high production efficiency doesn’t fall in your lap; you must plan for and work at it each day. Many producers achieving high efficiency levels create a high production efficiency “culture” in the work environment, instilling that thinking in their staff. They tend not to be satisfied with the status quo, and are always looking for better ways to manage. These individuals regularly seek the advice of farm professionals to help raise the bar. They understand the power of benchmarking, how it can be used to see what industry leaders are able to achieve, and identify areas of opportunity in their own operation. Important areas to focus on follow.
• Objectively evaluate cow comfort in milking and dry facilities. Production efficiency starts with the cow’s environment. When a cow is clean, comfortable and stalls are sized properly, you’ll have less lameness and the cow will be a more efficient producer.
It doesn’t always mean building a new facility. Ask yourself: What could we do to improve cow comfort in existing facilities? Many producers have made the choice to renovate older facilities by lengthening stall curbs for more lunge room, raising roofs for more sidewall height, increasing ridge ventilation, improving stall surfaces, using sand bedding and improving cleanliness and lighting.
Sometimes the best decision is to walk away from the old facility and build new. That kind of decision can be difficult, but the long-term impact on your operation’s production efficiency and viability can be huge.
• Improve heat abatement. When discussing heat abatement, many producers tell me they already have fans in their barns. However, fans are just the beginning. Along with fans, many high-producing herds use sprinkler and soaker systems in the parlor and barns to help maximize cow cooling. Sprinkler systems are relatively inexpensive, and may provide one of the highest return on investment to improve production efficiency.
If you already have fans, make sure they are effective and sized properly. In general, heat abatement is an area that many dairies could make significant improvements in without breaking the bank. Keeping cows cooled not only leads to higher feed intakes and higher milk production, but better summer and fall reproductive performance.
• Separate first-calf heifers from older cows. Research shows separating first-calf heifers from older cows can improve production efficiency through higher annual milk production shipped. Heifers benefit from reduced competition at the feed bunk, resulting in higher feed intakes. Generally, this doesn’t require much additional feed expense.
• Don’t overcrowd dry cow and fresh groups. Transition cow management is crucial to helping cows get off to a fast start by avoiding metabolic problems and maximizing peaks. Recommended maximum crowding levels for far-off dry cows is one cow per stall, and 0.8 cows for every stall in pre-fresh and fresh groups. A cow produces approximately 300 lbs. more milk per lactation for every 1 lb. of additional peak milk.
• Evaluate your cows time budget. Sufficient feeding and lying time are critical for high-producing cows. If either are compromised, milk production and herd health will suffer.
There can be many reasons for a cow’s time budget to be out of synch, including overcrowding, facility design or inadequate stall design or condition. If cows are consistently away from the feed bunk and stall area more than 3 hours per day, you may be losing production efficiency. You may be able to reduce time away from the bunks by bringing smaller groups to the holding area each time. If that is not an option, look at parlor expansion options. Some parlor renovation projects pay for themselves in three years or less through increased production per cow.
• Get serious about reproductive performance. When reproductive performance is poor, the result is longer days in milk and lower production per cow per day. A good goal to shoot for is >75% of cows pregnant by 150 days in milk. If this is an opportunity area for your dairy, improving reproductive performance could give you a significant boost in production efficiency. Often, it can be achieved with little or no capital investment.
• Don’t settle for less than excellent hoof health. Lameness can have a profound impact on your production efficiency by limiting mobility, feed intake and reproductive performance. This is an area where you can be penny wise and pound foolish by purposely limiting footbath frequency and trimming expenses. Several super high-producing dairies have gone to trimming cows hooves 3X per year: once at dry off; once 60 DIM; and then after they are confirmed pregnant.
• Maximize forage quality. Maximizing income over purchased feed costs is a big part of improving production efficiency, and feeding high forage diets is a big part of that. Many high-producing herds feed high-group rations with 56%-62% forage (dry matter basis). There is no secret that cows make more milk on less grain with high quality forages vs. poor quality forages.
• Make sure you are milking the right cows. Many producers have improved production efficiency by identifying and voluntarily culling less efficient producers – especially if they are running barns at capacity and have ample replacements in the pipeline.
• Consider milking fresh cows 4x for the first 20-30 days in milk. This doesn’t take a lot of extra labor expense if you have the extra parlor capacity. Most producers run the fresh cows through the parlor first, and then again after all other groups are milked. Several dairies I work with have been milking fresh cows 4x for the first 20-30 DIM for a while now, and have seen a 2-4 lb. improvement per cow on the whole herd as a result.
Conclusion
With today’s high input costs and volatile milk prices, maximizing profit per cwt. of milk sold is no longer an option if you want to remain viable in the dairy business. Achieving high production efficiency comes down to removing nutrition, herd management and cow comfort roadblocks that hinder a cow’s ability to produce milk efficiently. When roadblocks are removed, the cow will pull you to higher production efficiency rather than forcing high levels of milk production with existing barriers via expensive inputs. The end result of forcing cows to produce high quantities of milk when barriers exist is poor production efficiency.
Mark Mapstone is a farm business consultant for Farm Credit East, ACA. Reach him at 315-841-3398 or [email protected].