COLUMBUS – Whether the question is where to locate a new dairy operation, or how to make the small established Ohio dairy more profitable, the answer may be found in benchmarking.
Benchmarking was the topic of the day at the Dec. 4 Ohio Dairy Management Conference, with a Cornell dairy market specialist describing his work to determine the characteristics of top dairies, and OSU dairy specialists describing their work to find the elements of successful smaller dairy farms.
Mark Stephenson from Cornell University was there to discuss Top Dairies, an initiative that has grown out of his attempt to determine what the growth in western dairy production meant to eastern producers.
Stephenson’s efforts to gather financial information on dairy operations from around the country, and to determine where was the best place to locate a dairy operation and what were best dairy practices led to a 1997 meeting of about 100 top producers from around the country.
Stephenson said he has discovered that the movement of dairy production to the West is the result not only of population movement, but also of some aggressive campaigns to establish new dairy production in areas where dairy tradition had no previous hold.
For most of the 20th century, he said, California, Wisconsin and New York have been the top three dairy producing states.
As the center of population shifted West, until it now resides in Missouri, the center of dairy production followed, always slightly northwest of population.
But local market is no longer as important in dairy production, Stephenson said. The new western dairy operations locate on the basis of other factors, including regulatory burden, neighbor relations, labor supply, and cost of production.
However, he said, the development of the industry has definitely created two entirely different systems of production.
In general, Stephenson said, the top 100 farms were large, but in the West they averaged twice as many cows as those in the East.
Eastern farms average six times more crop acreage than Western farms. Western farms own only the land on which the cattle are kept, and buy all feeds.
The East outproduced the West on a milk yield basis, with Eastern farms averaging 22,000 pounds, and Western farms 19,000 pounds.
In the West the farms totaled 86 cows per worker while in the East it was 46 cows per worker.
In terms of debt, the average was much higher on Western farms, but was primarily short-term debt incurred from buying feed. Eastern farms had higher long-term debt, invested in facilities and land.
The margin of return per cow was somewhat higher on Eastern farms than on Western, but with their larger number of cows, the net farm income proved to be almost identical in the two regions, averaging just over $200,000 in both areas.
Since 1997, U.S. Top Dairies has expanded its range, and has now become a national database that contains financial information on more than 1,000 dairy farms. A Web site, http://cpdmp.cornell.edu/topdairies, has recently been opened, and participants who submit data have unlimited access to database queries.
Use of the data gives farmers a chance to plot their own financial picture in relation to a number of factors, and to compare themselves with others along any number of perimeters.
Stephenson said the results of this work has led him to conclude that milk is being produced profitably in every state in the country.
By understanding top dairies and making comparisons, he said, every dairy should be able to become a more profitable producer.