Managing Costs: Tighten Your Belt

Manage the costs that don’t impact production.
( Farm Journal )

It is no secret we are in the midst of a dairy recession. As producers try to find ways to tighten their belts and weather the storm of low milk prices, all components of the farm’s budget should be evaluated. There might be a few aspects of the operation that could be removed or reduced without sacrificing health and productivity. 

Know Your Cop

Before you decide to stop using a product or eliminate a management practice, consider what it costs your farm to make 100 lb. of milk. After you establish this number, you can further break down the components of your cost of production and what areas need additional evaluation. If you aren’t sure how to figure your cost of production, work with an expert. Cost of production is highly variable among farms, so you can’t just look at industry averages. After you realize how close or far your cost of production is from current prices, sit down with your farm consultants to evaluate what can be done. In most cases, if the products you use on your farm have provided some financial benefit before, hopefully they still provide that benefit today.

Let’s examine where producers can fix management bottlenecks. Consider reducing feed shrink, decreasing transition cow disease incidence, improving calf health, decreasing lameness, improving reproductive management and lowering mastitis.

Feed shrink happens on every farm. How much protein supplement gets rained on or blown away in the wind? How much corn silage gets hauled on the fields because of poor bunker face management or inadequate packing? How much TMR ends up in the cow alleys because cows toss it on their backs due to poor fly control? How much feed is thrown away due to heat spoilage? With feed costs being the highest cost on the dairy, don’t necessarily look to cut a product from the ration, rather, work to reduce the shrink of your current feed supply. 

Manage Transition

Transition cow disease is an area of tremendous cost on a dairy, but the costs do not always directly hit producers in the pocketbook. Every case of mastitis, metritis, ketosis, DA, etc., has a direct cost to the farm (drugs, death loss) and an indirect cost (lost milk, reduced reproductive efficiency). Transition cow disease might be robbing the cows of peak milk and total production throughout the lactation. Interventions to improve transition cow health can be as simple as cow movement, pen changes, feed delivery, stocking density, etc. The veterinarian and nutritionist should get together with the producer to come up with a plan of prevention.

Producers might consider cutting vaccines during low milk prices; however, treatment of disease is often much more costly than prevention. Work with your veterinarian to critically evaluate vaccine use. Some products could be removed without compromising health. Most vaccines are a good investment when used properly.

Milk price depressions are typically short lived, and prices often rebound. Trying to cut areas that affect future productivity might be shortsighted. For example, cutting back to feeding a basic calf milk replacer will reduce weaning weights, which will reduce first lactation milk production two years down the road. Semen purchases will also have an impact. Using cheaper bulls might save money now but cost money later. Cutting these areas might have an impact on the profitability of your farm far into the future.

A key message of this discussion should be a farm can reduce costs simply by streamlining processes, reducing bottlenecks and improving production and health. These changes will make the farm better suited to survive. If you make a cut and it reduces production, understand what that means to your bottom line. There are resources available to examine what a pound of milk or a tenth of fat or protein means to your milk check. In most cases if there is a will to survive in the dairy industry, there is a way.

Gabe Middleton is a partner with Mel Wenger at Orrville Veterinary Clinic, Orrville, Ohio. He serves bovine, equine, small ruminant and small animal clients.

 

Note: This story appears in the April 2018 magazine issue of Dairy Herd Management.

 
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