Understanding Costs to Improve Operations and Profits on Dairy Farms

The goals of the project were clear: Develop enterprise activity analysis tools to assess the costs of various enterprises within a dairy farm business, enhance user efficiency of the Dairy Profit Monitor benchmarking program and increase the number of participating farms. The results were outstanding.

This article was developed for the 2015 NYFVI annual report. More information about discussion groups and the business management tools offered by Pro-Dairy can be found here.

In 2006, with the support of Farm Viability and Cargill Animal Nutrition, PRO-DAIRY developed the Dairy Profit Monitor as an online tool to help farmers evaluate the operating performance of their dairy farm on a monthly basis.  In addition to other performance and financial metrics, it calculates Net Milk Income over Feed Costs (IOFC) as a key tracking measure for operating performance an indirect proxy for profitability.  Farmers and consultants access the program on a monthly basis, entering data to compare their operation to others and see the impact of their management changes.  All in all, it was a good program.

And then it became great.

In 2013, Farm Viability awarded the PRO-DAIRY team an additional $105,000 to further develop the platform and enhance overall educational programming efforts to accompany it.  First on the list was the development of three enterprise activity cost studies. A milk harvest study found costs to operate a milking center ranged more than 150% among participants; The analysis of the costs to raise dairy replacements showed costs differed by about 20%; a manure handling study found a cost range of approximately 225%. 

The significant differences in operating costs represent opportunity for dairy farmers.  Although every farm is unique, understanding how their business compared, provided farmer’s insight as to where costs could be better managed. 

This information was leveraged even further at business-focused dairy discussion groups, organized by herd size.

“Tiashoke Farm started using the Dairy Profit Monitor several years ago, and we’ve never looked back. Every month we rely more and more on the enterprise analysis it provides to help us make better management decisions and prioritize our investment. Last year, we made changes in our young stock program and learned how to grow a better heifer.  Up next we’re changing the way we raise our calves to become more competitive.”

Stuart Ziehm, Tiashoke Farm

These groups meet twice a year providing a forum for producers to meet with other similar farms and confidentially discuss shared reports and management practices.

The team didn’t stop there, with the refined tool, the program saw an increase in participation from an average of 39 farms per month in 2011-2012 to an average of 70 farms per month in 2014-2015.

The best part? Participating farms increased net milk income over total lactating feed cost by an average of $187,471 annually.  That’s a total increase of $13,497,934.   

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