Emphasize 'net milk income over feed costs'

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Editor's note: This Practice Builder was developed from a paper presented at the Western Canadian Dairy Seminar by Jason Karszes, farm management specialist with PRO-Dairy and Cornell University.

Timely, accurate and detailed records are necessary to analyze a business, according to Jason Karszes, farm management specialist with PRO-DAIRY and Cornell University. Karszes addressed business analysis at the Western Canadian Dairy Seminar last March.

He emphasized the importance of net milk income over feed costs, calling it the key performance index for tracking and managing the feeding program.

"The largest expense on dairy farms is feed, and feed also has the largest impact on a cow's output," he said. "How we track the performance of the feeding program, and react to that, impacts a dairy's profits."

More specific to farms that purchase feed, he said, "Net milk income over purchased feed costs consistently shows a higher correlation to overall farm profitability than any other measure. This measure represents the money on a per-cow basis that is left over to cover all other expenses on the farm."

And, here are a few of his comments on records analysis and problem-solving:

The first step in analysis is having financial and production records necessary to provide basic information. These records can be thought of as "TA-DA":

  • Timely
  • Accurate
  • Detailed
  • Accessible

The second key management strategy used on farms to lower costs and improve returns is problem-solving. Common pitfalls in the problem-solving process:

  • Biased view of signs of problem.
  • Not having defined objective/goals.
  • Blaming external factors.
  • Solve symptoms, not root causes.
  • Incomplete or biased information.
  • Only look at technical causes.
  • Lack of creative solutions.
  • Failure to solicit input from others.
  • Rule out solutions because of bias.
  • Not related to objectives/goals.
  • No systematic approach.
  • Go on "gut feeling."
  • Keeping plans to oneself.
  • Not writing plans out.
  • Missing some important details.

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