Fall 2009

Feed Ten Tips For Tough Economic Times

Solutions for Tough Economic Times on the Dairy. Although these solutions will not eliminate negative cash flows, our hope is that they will help minimize your losses to allow you to stay in business long enough to capitalize on the profits that will eventually return.
Before you determine which of the ideas to implement, be sure to base your decisions on science. Many investments have potential for improving profit, but this is not a time to choose unproven technologies. Make sure your inputs are proven with objective research and consider the ‘risk’ in your decisions. Use technologies with a high return but low risk. The amount of data behind a technology usually dictates how risky it is.
We also recommend that you stay the course with long term consultants. It may be tempting to cut costs by changing nutritionists and/or veterinarians. This is certainly not the time to lose those consultants that have a long term history with your operation. Those that understand your operation best will be invaluable in finding the biggest bottlenecks to cash flow with your dairy.
Finally, be careful with the concept of saving a nickel but losing a dime. The next increment of milk is generally the most profitable, so whatever you do, don’t compromise milk income when you cut input costs. In this environment you will certainly need to concentrate on short-term profits. But, be careful not to compromise long term profits if it harms future cow health. It would be disastrous if your cows were not in the condition to reap the profits once the milk price turns around.
So with that, below are 10 ways to help you squeeze out more cash from your operation.

1. The first goal will be to keep it simple. That means focusing on the basics, like cows and forages. We recommend that your primary focus be on cow comfort. If culling some of the herd is a solution with your dairy, this is the time to make the highest producing cows as comfortable as possible.
2. Most producers start by culling the least profitable cows. Work with your nutritionist to determine break even milk production. Look first to cull the lowest producing cows as an asset to cover the loan, it may be possible to convince the bank that pregnant cows should be valued higher than non pregnant cows. Also, remember to consider removing the cows that contribute the highest numbers of somatic cells to bulk tank. If enough of these cows are culled, it could put the herd into a higher milk quality bonus - thus raising the overall milk blend price. However, keep your dairy operating at capacity. This is a time where poor cows can be swapped out for good cows at a low cost.
3. Speaking of milk blend price, milk continues to be priced based on milk protein (and solids-non-fat) and fat. Consult with your nutritionist on ways to increase the yield of milk components.
4. While you may not have the cash to purchase higher quality forages, there are lots of ways to improve the quality of the forage you now feed. Make sure the silage face is clean and unspoiled, moldy silage is not fed to lactating cows and hay is blended into the ration correctly.
5. If the herd is mixing a ‘one group ration’ it may be time to move back to feeding multiple lactation rations. With higher feed costs it may be more profitable to mix more rations and cut back on some of the more expensive ingredients in the late lactation pens.
6. Manage expensive push outs. If you can push out feed more often you can blend some of it back into the low pen rations rather than feeding it to the heifers. Test how much push out can be blended back into the later lactation pen diets without dropping milk.
7. Audit the TMR. Find and eliminate the sources of variation. This includes the consistency of the mix and can often be improved by changing knives and replacing pads in the TMR mixer wagon. It may be the time to look very closely at inventory shrink. If there are ways to cut shrink this means instant cash flow.
8. All of the above will help you monitor dry matter intake more closely - this is the key to measuring, monitoring and improving the efficiency of the dry matter fed. But don’t stop with feed efficiency, use income over feed costs as your final measure. This equates to net profit from the feeding program. And remember, when you are focusing on cash flow, use cash costs for current feed costs. For example: it may take less cash out of your pocket today by feeding more expensive feeds that are already paid for.
9. Ask your nutritionist about ingredient purchasing tools like Sesame, and feed sampling software, like Ping Pong from The Ohio State University. Often times there are better buys on ingredients if you can calculate the relative nutrient values. Sesame software can help with this calculation. Ping Pong helps to determine how many ingredient samples are needed to control variation making a more consistent TMR.
10. Finally, over the longer term, consider a risk management strategy for both milk and feed. It may be the best strategy to do nothing when it comes to locking up milk prices and feed costs. However, make sure this decision is based on a strategy rather than fear or lack of knowledge. If you are new to milk contracting, consider implementing a ‘mock’ strategy in the next few months to better understand the process before implementing a system with real money. That way much of the fear will be taken out of the strategy when you are ready to start.
Although this list is not all-inclusive, and we realize some of these strategies may be easier to say than do, one or more of them might be just what is needed to make it through these tough economic times.