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:
- Volume of sales. Influenced by milk production, components, and premiums.
- Efficiency at which they acheive those sales.
- The degree at which they run at full capacity.
- Growth achieved in their business.
- 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.
Copy of slide show presentation available on request.