MERCER, Pa. – Penn State’s Mark Douglass stood in a room full of farmers and told them each how much money they’re losing every year.
Forty thousand. A hundred thousand. A hundred and eighty thousand. Dollars.
Break that down and some could be losing as much as $1,600 per cow in potential revenue.
That’s enough to make most farmers want to grab Douglass by the throat.
But these farmers remain in their seats, studying the numbers, taking notes, sharing their figures.
They asked for this – and paid for it – hoping the information will ultimately help their bottom line, even if it makes them cringe in the meantime.
It’s part of a new effort by Penn State to pinpoint individual farm’s weakest links. Whether it’s reproduction or milk quality or culling, the new tool called Dairy Profitability Risk Assessment Tool, or DairyPRAT, zeroes in on these areas.
Calculations. Mary Schmidt knew the Crawford County dairy she operates with her husband, Jeff, and brother-in-law, Mike, was too labor intensive. But, what she didn’t realize was how much it was affecting their profitability.
By filling in more than 60 numbers about a farm’s expenses, revenue, acreage, milk production and calvings, the tool calculates risk levels in several areas. These include financial ratios, capital efficiency, operational efficiency, milk yield and components, reproduction, udder health and milk quality, and culling and replacements.
Based on each farm’s numbers, high-, moderate- and low-risk levels are assigned in 21 more specific areas.
In Schmidt’s case, the “operating expense ratio” was startlingly high.
She found they were spending 80 cents to make a dollar, and labor is one of the major expenses impacting this number.
Their 100 milk cows and 230 young stock are spread among four barns, which means feeding and cleaning has to be done in four steps, twice a day.
And although they thought they were putting their old tiestall barn to good use by housing 100 head of young stock there, it actually created more work.
The barn wasn’t equipped for these animals, so scraping stalls is done by hand and, even though they feed TMR, it must be done by hauling wheelbarrows into the barn.
But would it be worth it financially to build a new facility to even out their operating expense ratio?
That’s what Schmidt is looking into now.
Even though this first group of northwestern Pennsylvania farmers received their DairyPRAT results only a month ago, Schmidt already enlisted the help of her accountant.
‘Eye-opener.’ Other results got her talking with the vet instead.
The farm’s cull rate numbers were so low, it was placed in the high-risk zone.
“I thought a low turnover rate was good,” Schmidt said. But as program co-chair Brad Hilty pointed out, the farm wasn’t taking advantage of progressive genetics, meaning higher-producing cows.
“We didn’t realize we could actually be hurting ourselves,” she said.
When Schmidt got home, the vet showed her the records that proved Hilty’s point. The farm’s first-time milkers were out-milking third-lactation cows. Since milking is more traumatic for first-calf animals, they should theoretically be producing less milk than an experienced milker.
“It was quite an eye-opener,” she said.
Over the last month, they’ve worked up a cull list of cows with higher somatic cell counts and breeding problems.
Scratching the surface. It wasn’t just Schmidt who took plenty of homework back to the farm.
The group included owners from seven farms, and overall, they had considerably more high-risk results than low. Most were in capital efficiency, operation efficiency and reproduction.
Every farm in the room had potential lost revenue, ranging from $40,000 to $182,000.
Some were losing $316 per cow, while others were as high as $1,594.
Getting these results is only scratching the surface, but it’s a good starting point, said Douglass, who helped co-chair the making of DairyPRAT.
Farmers can take these results and start looking closer at the risk areas.
Just going through records to find those more than 60 numbers is a good exercise, Schmidt said. It forces you to look at each number more carefully than normal, she said.
Getting out the kinks. Douglass is the first to admit the tool isn’t perfect.
Although Penn State experts have been working on it for a year and a half, they’re just now trying it out on actual farms.
And with each farm comes unique circumstances and new problems for the Microsoft Excel-based tool to handle.
For example, what about an expanding herd, or new farmers, or mixed-breed herds?
Douglass said they’re taking notes on all these “kinks” and hope to adjust the program.
Farmers like Schmidt hope the tool someday will be available for them to do on their own, to see if their farms are improving.
“It’s constructive criticism and it’s already helping,” she said.
(Reporter Kristy Hebert welcomes feedback by phone at 800-837-3419, ext. 23 or by e-mail at firstname.lastname@example.org.)
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Mark Douglass, program co-chair