COLUMBUS – Figuring the benchmarks for more profitable production of the smaller herd was the emphasis of research on Midwestern practices reported at the dairy conference by OSU dairy specialists Jim Polson and Dianne Shoemaker.
There is, they said, a wide disparity between the income of the most profitable and least profitable farms with 85 to 120 dairy cows.
And if there is one thing they have learned about northeastern Ohio dairy farmers, it is that they don’t want to expand to 300, 500, or 1,000 cows. They want information on the 100-cow herd.
In the data from Michigan, New York, and Wisconsin, Polson and Shoemaker located 235 dairy farms with 76 to 121 cows.
In 1998, a good year for Midwest farms, the average farm in this study had a net income of around $80,000.
What this research discovered was that high milk production is not necessarily associated with high profits, although a farm did need to maintain its production averages at or above the averages for the area.
Neither did labor efficiency, cost control, or debt level necessarily correlate with profitability. The investment per cow was highest on some of the most profitable farms.
What high profit farms did seem to have in common were higher income per cow than the average; lower operating expense ratios; good, if not excellent, milk production; and a farm debt less than 45 percent of farm assets.
On high income farms, non-milk sale income was higher than average, whether that income was in livestock, feed crops, or other commodities.
On the highest income farms, milk sales accounted for only 79 percent of farm revenues, as opposed to 87 percent on the lowest income farms.
At the same time, the most profitable farms showed net operating expense ratios 6 to 10 percent below average farms, and 14 to 19 percent below low income farms.
It is therefore possible to say, according to Polson and Shoemaker, that the highest profit farms with around 100 cows show the following operating characteristics:
* A gross farm income greater than $3,500 per cow;
* An operating expense ratio less than 60 percent;
* Milk production above state averages;
* Farm debt less than 45 percent of farm assets and $3,000 per cow.
Although the last factor did not correlate directly, the farms with the highest returns tended to carry less debt per cow than the farms with low returns. With some notable exceptions, the benchmark figure is the highest debt level carried by high profit farms.