Dairy Channel: Dairy Channel: Smaller guys lose less money each day than big guys

I think it officially rains 3 times a year in Nevada. So, of course, it rained during the Western Dairy Management Conference in Reno in March.

The rain was accompanied by winds gusting at 60 miles per hour, which started cranking up when we were visiting a dairy in the middle of the desert.

(Wind + sand = a mess … I remain convinced that Ohio is a really good place to milk cows.)

Strange trip. This was one of the stranger study trips I have been on.

After the conference, we headed to California, north of Sacramento. There is an incredible amount of highly productive agricultural land there, stretching as far as the eye can see. Houses are few and far between.

In March, grass was greening up and trees were blooming. Without irrigation, however, the landscape would be brown in 3 months.

Crops in the area include almonds, grapes, tomatoes, alfalfa and a whole bunch of rice. Every couple miles was a large grain elevator for storing rice.

Alternative use. Rice? That was a new one on me. When I think California, rice does not come to mind. Where there is rice, there is also a lot of rice straw.

This was the only area where environmental regulations were apparent (they seemed to be non-existent elsewhere.)

The old management practice was to burn the straw off of the fields after harvest. Burning is now banned, so other uses have to be found.

One use was as the forage in beef rations. Obviously, it has a little more nutrient value than wheat straw, but not enough to make it worth shipping east.

Of interest. The most interesting visit was to a beef feedlot and rice farm. These guys were masters of using by-product feeds.

The TMR was very strange looking. It consisted of rice straw, tomato pomace (interesting stuff), waste prunes (the steers and heifers were very regular), waste rice cakes (as the farmer put it, things that are totally tasteless unless they make them taste like something else) and some supplements.

Two guys, three horses and a dog took care of 1000-plus animals and the cropping operation.

When I asked how the dog was trained and helped with the herd, the foreman gave a short, almost inaudible whistle to the pup who jumped into the adjoining pen, ran a steer away from us, jumped back out and sat down next to him waiting for the next job.

She made my dogs look pathetic.

Environmental regulation. What absolutely knocked me between the eyes was the apparent lack of environmental regulation, or maybe it was enforcement that we saw related to dairy farms.

This area had gotten 5 inches of rain in two days. At least half of the farms were “drylot” dairies. To say that the cows and lots were a mess is the understatement of the century.

While I understand that the rain made a mess of the lots, they did not appear to be very well-managed lots no matter what the weather.

Driving by one farm, the drylots came right down to the road. Where the corners of two drylots met, at the bottom of a slope, not one foot away, a ditch was running full tilt.

Guess what? The water was dark brown.

If a similar scenario existed in Ohio, I feel confident that the situation would be addressed right quick.

Freestall vs. drylot. More dairies are building freestall barns because the drylots have some obvious disadvantages during wet weather.

However, some guys just really haven’t gotten the whole picture.

At one 900-cow dairy, the dairyman was explaining that they had put some pasture mats in some of their freestalls, but was unhappy because somatic cell counts had risen.

“The sales people say that it won’t happen … but everyone around here knows that SCCs go up,” the dairyman said.

Just for the heck of it, I asked him what he bedded with.

“Nothing,” was the reply. Well, duh! What do they think is going to happen?

Conference. The conference itself was very good. Besides good presentations, one of the things I enjoy most is talking with dairy producers, dairy industry types, extension and research folks from all over the country.

Normally, I prefer to sit back and watch people. Over time, I learned that the best thing to do at this meeting during meals is to sit down at a table where you don’t already know anyone.

This is not hard to do as there are hundreds of participants and most people don’t know bunches of other people.

If I had to summarize the conversations with dairy folks from California and Arizona, I would say that dairies are in a hurting way everywhere.

Some interesting information from these conversations: A bank that does a financial summary for about 20 herds of 1000-plus cows pegged total cost of production between $12 and $12.50 per hundredweight.

If you have been following milk prices on the west coast, they aren’t running anywhere close to $12.50 per hundredweight.

Serious dilemma. One relatively new farm in Arizona has met with their lender and determined the absolute lowest level to which they can let their equity position fall.

If equity reaches that level, they sell out.

A group of dairy farms in a more remote part of Arizona pays more than $1.20 per hundredweight for hauling.

Think of that for a minute: Their milk price is below $10 per hundredweight and $1.20 of that goes just to get the milk to the plant.

These farms have a serious dilemma. How long can they hold out for higher prices?

If they do sell, do their farms have any market value when they are so far from the plant that hauling rates are triple that for other farms?

In that case, is there any market value for the real estate at all?

Service providers, too. Service providers have similar dilemmas.

How far can they carry open accounts without jeopardizing their own businesses? This was the concern voiced by a dairy veterinarian from Arizona.

In addition to veterinary and consulting services, they also sell milking supplies such as teat dips. They are seeing an increase in clients who are at least 3 months behind on their accounts.

With their larger herds, a client three months out may owe them $50,000 to $70,000.

Besides creating a cash-flow problem for the veterinarian’s business, they are at risk of not getting paid at all if the client has to declare bankruptcy.

As the holder of the open account, the veterinarian is an unsecured creditor which means he could be lucky to collect pennies on the dollar.

Even in the face of less than optimal conditions in the dairy industry, folks can still laugh at themselves a bit.

As we finished breakfast Thursday morning, one “small” – 500 cows – California dairyman put it best.

“We are one of the small ones, so we loose less money every day than the big guys.”

(The author is the northeast Ohio district dairy specialist with OSU Extension. Send comments or questions in care of Farm and Dairy, P.O. Box 38, Salem, OH 44460.)

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