Six management priorities for a farm’s financial success

High milk prices have been overshadowed by skyrocketing costs for nearly all inputs on dairy operations, including feed, labor, fertilizer and fuel. Accounting firms often set benchmarks for dairies, highlighting opportunities for farms to improve. But what do these numbers really mean? What management steps make a difference? Which numbers have the biggest impact?
In 2019, Compeer Financial and Zoetis released results from 11 years of herd data across nearly 500 dairy operations. They examined year-end financial and production record summaries to distinguish the most profitable dairies from others. The study attempted to define what drives profitability year after year on dairies over a wide range of size and scope. The following six financial drivers are key areas where money is made and lost, and they separate dairies with top financial performance from others.

Somatic cell count
Topping the list as the biggest impact on profitability was somatic cell count. As SCC rose on farms, profitability dropped because SCC affects energy-corrected milk, death loss, days open, pregnancy rates and herd turnover. The top third of herds in the study had an average bulk tank SCC of 132,000 cells per milliliter, while the bottom third of herds averaged 284,000 cells per milliliter. The study also showed that, for every 100,000 cells per milliliter increase in bulk tank SCC, milk yield declines 5.5 pounds.

According to the study, the difference between the top- and bottom-third herds was about 20 pounds of ECM per day or $0.76 net farm income per hundredweight. What is a reasonable goal for milk production on your farm? Do you achieve 6 pounds of combined fat and protein yield per cow for Holsteins or 5.25 pounds for Jerseys? Pounds of milk are still important, but pounds of fat and protein represent more than 80% of your milk check. Work with your nutritionist to strategically formulate lactating cow rations to foster more butterfat and protein yield.
Herds with higher ECM also show an improved pregnancy rate, lower feed costs per cwt, fewer days open, lower death loss and reduced SCC. Herd dynamics such as a high percentage of 2-year-old cows (more than 40%) or high days in milk (greater than 180) can negatively impact production.

Net herd turnover cost
The study showed a $1.08 per cwt difference in net herd turnover cost when comparing the most profitable and least profitable dairy herds. Are you culling older cows prematurely because you have too many replacement heifers in the pipeline? What strategies can help you manage your heifer needs without causing a hole in supply?
Overproduction of heifers can cause a cash flow crunch. Raising the right number of heifers is important, but raising the right kind of heifers is important too. Genomics and/or parentage can identify heifers with lower potential. Many semen suppliers have mating programs to help you manage this. They can help you determine which animals should receive beef semen, sexed semen or conventional semen.

Death loss
Death loss, as can be expected, negatively affects profitability. The best third of farms in the study had a death loss of 4.3% compared to the worst third with a death loss of 10%, a difference in profitability of $138 more per cow per year (or 7 more pounds of milk per cow per day).
Most death losses occur during the first 60 DIM. If death loss is too high in this period, evaluate transition and fresh cow programs. Consistent records of the reasons cows die on your dairy allow you to identify and mitigate the causes more quickly.

Pregnancy rate
The most profitable herds had an average pregnancy rate of 27.4%. More profitable dairies have higher breeding costs but achieve a higher pregnancy rate. Factors such as voluntary waiting period, heat detection, program compliance and conception rates are key areas to examine and monitor. A higher pregnancy rate helps ensure your herd is in the optimal range of DIM. For every 10-day reduction in DIM, herd milk production will increase an average of 1.5 pounds per cow per day.

Heifer survival rate
The best third of the farms achieved a 97.5% heifer survival while the bottom third was at 91%. If you are not approaching a goal of 95% heifer survival rate, work to identify bottlenecks in the system. Set benchmarks and evaluate your heifer rearing operation to improve heifer survival rates. Key considerations should be on monitoring quality and timing of colostrum feeding, recording heifer health events and tracking growth rates over time. A goal is for a heifer to freshen at 85% of mature bodyweight at 22 to 24 months of age.
According to this study, these six dairy financial drivers account for 85% of the variation in farm profitability. Maximum profitability on dairies starts with excellent animal husbandry. With record-high expenses, we also need to focus on monitoring performance parameters to maximize earnings on the dairy. Track and organize data in a way that is easiest for you and your management team to review and make decisions accordingly.
    Barry Visser is a nutritionist for Vita Plus.


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