Energrow Inc.

2009 showed some of the poorest earnings in decades for northeast dairies, according to data collected from Dairy Benchmark and DPA.  Knowing how your farm is doing on a timely basis allows you to make timely decisions and implement an action plan that will work for the success of your operation.  The healthiest margin herds (net margin/cwt) showed a healthy balance in 5 key areas:  

The 5 Key Contributing Factors to Profitability:

  1. Volume of sales. Influenced by milk production, components, and premiums.
  2. Efficiency at which they acheive those sales.
  3. The degree at which they run at full capacity.
  4. Growth achieved in their business.
  5. Overall cost control.

These high profitability operations didn't necessarily have the best performance in each area, but rather a balance of them.They grew all their forage, raised all their own replacements, some of their corn grain and yet sold excess animals on 2 crop acres per cow. Their freestalls were not overcroweded.

What does all this mean?  Like it or not, the dairy owner is in a commodity business.  Low cost producers with the day in a commodity market.  Net margin is what ultimately determines the long-term viability of the business. We don't have to be the best in all 5 factors to be successful.  But a balance needs to be found with being better than average in a couple of the areas.

Article adapted from a presentation presented at Renaissance Nutrition’s Bucknell Conference 2010  by Gary Snider, Agricultural Business Consultant, Farm Credit East, This email address is being protected from spambots. You need JavaScript enabled to view it.
Copy of slide show presentation available on request.

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