Benchmarking the performance of your dairy against other dairies is a great tool, but it can lead you astray if you're not careful.
Benchmarking is a "double-edged sword," points out John Fetrow, professor of clinical and population sciences in the College of Veterinary Medicine at the University of Minnesota. Often, people become fixated on getting their cost below certain values that represent an average in a benchmarking program.
But, as Fetrow points out, the goal is not to minimize cost, but rather to maximize profit.
Let's use a producer named "Bob" as an example. Bob runs a 100-cow dairy, and for the last several years, his rolling herd average has been around 19,000 pounds. He wants to break the 20,000-pound threshold, and one way to do that is to feed a higher-quality ration. By making each mouthful of feed 5 percent more expensive, he adds $7,908 to his total feed cost, or nearly $80 per cow. That may appear excessive, considering the average Upper Midwest dairy usually earns a net profit of $400 per cow per year, and $80 would be one-fifth of that. But, using a computer program to simulate this example further, Fetrow points out that an extra 1,000 pounds added to his rolling herd average would net Bob an extra $13,000 per year, assuming a milk price of $13 per hundredweight. And, after the extra feed cost is subtracted, Bob comes out $5,092 ahead.
Bob's feed cost rose from $5.01 per hundredweight of milk produced to $5.15, yet he ended up making more money in the long run because he was spreading the feed cost out over more hundredweights of milk.
It would have been a mistake for Bob, in this case, to simply chase benchmark figures. Indeed, many consultants would have simply pointed to the benchmarks and said it was necessary to get feed cost per hundredweight below $5. That may have precluded Bob from feeding the type of ration he needed to get increased production.
This example illustrates two inherent pitfalls in using benchmarks: (1) becoming too fixated on cost, and (2) accepting what consultants and others say the benchmark figures should be without putting things in proper context.
Fetrow says it's important, too, for a farm to compare itself to other farms of similar size and level of milk production. Otherwise, the farm won't get an accurate picture.
It's not that Fetrow is against benchmarks; he would just like to see producers benchmark "smarter."