Resilient dairy farmers
by Tamara Scully
The 2020 Young Cooperator’s Leadership & Development Program, from the National Milk Producers Federation, aimed to put young dairy farmers on the path so success. Amber Roberts, ag business management Extension educator, University of Minnesota, discussed dairy farm resiliency.
Roberts shared data from a survey of 90 Minnesota dairy farms, studied for a period of seven years, with the goal of determining the characteristics that make a dairy resilient. The total cows on these farms numbered over 35,000, and the farms ranged in size from 22 to 1,115 head. The goal was to merge farm-level and individual cow-level data to ascertain the factors that most impacted resiliency.
“It gets very complicated when you’re talking about farm-level finances, and how you pair that with individual cow data,” she said. “We wanted to use both data sets, to be able to merge them together, to get a more comprehensive understanding of the farm’s financial situation and how they are using different production management techniques. Not every cow has the same impact on that farm’s financial impact.”
Using methods to capture those variables, the study wanted to find out which characteristics have the most impact on a farm’s resiliency. But first they had to determine what, exactly, resiliency on a dairy farm was and how can it be measured.
The factors used to determine resiliency were the adjusted net farm ratio, measuring short-term resiliency, and the rate of return on assets to measure long-term resiliency. Sixteen of the farms in the study were resilient under both measures. For purposes of the study, farms which were in the top 25% for the majority of the seven years (2012-18) of the study were considered to be resilient.
“Is there truly a difference between resilient and non-resilient farms? Yes, there was. Resilient farms were statistically different than non-resilient farms,” Roberts said.
Of the 24 resilient farms, only two had herds larger than 500 head; the remainder had under 250 cows. On average, the resilient farms made $15,000 more per year than non-resilient farms. Resilient farms did a better job of retaining profit, gaining more money back – 13 cents more – for every dollar spent than non-resilient farms. On average, the resilient farms made $86,000 in net farm income.
“Which kind of went against what we’ve been hearing: that small farms can’t be resilient,” she said. “That small farmers can’t remain profitable.”
During the study years, milk prices were volatile. Two of the 24 resilient farms had negative net farm income in years when milk prices were low, while 43 of the 60 non-resilient farms had negative net farm income during those years. Net farm income of resilient farms was also more stable than non-resilient farms.
“Our resilient farms are willing to give up some of that potential higher profit during years when milk prices are high in order to ensure in years when milk prices are low that they are not losing income, and are still remaining profitable,” she said.
While these data are very insightful, the challenge was to merge this with meaningful production data, Roberts said. “How do you take these from farm level finances and bring it down to the individual cow?”
Using three different weighting mechanisms, they were able to take farm-level expenses and assign them to individual cows, realizing that not all cows are equal. The researchers chose three different metrics, and ultimately merged the results to create a comprehensive data set. The metrics utilized were DHIA performance groups, volume of production using energy corrected milk and equal weighting, which allows for the actual days each individual cow was in lactation and calculates each cow’s share of the farm’s expenses.
The resulting data set contains useful information, but what factors are primary indicators of resiliency? With over 2,000 different variables to consider for each dairy, the researchers created five categories to examine in relation to resiliency: human resources, herd structure, animal health, financial indicators and use of technology on the farm.
Human resources include farmer age, educational opportunities, hired labor and whether a second generation was present on the farm. Animal health looked at milk production, feed costs, percent fat and protein and cull rate. Herd structure included acres/cow, size of herd, the percentage of crop acres owned and the percentage of cows who hit their break-even mark. Financial indicators included working capital per cow as well as farm debt-to-asset ratio. Technology adoption examined whether the farm raised replacement heifers and whether or not they were a proactive dairy, defined as using at least three of six progressive practices (sand bedding, compost bedding, total mixed rations, free-stall barns, robotic milking and thrice daily milking).
“What’s the relationship between these factors and dairy resiliency? What is setting those 24 farms apart from the others? What are they doing differently?” were the questions to answer with the data, Roberts said.
Milk production numbers were lower on resilient farms even after adjustments for herd size were made. Instead, resilient farmers were focused on quality premiums over volume. And cow longevity was longer on resilient farms.
“Resilient farmers value quality over quantity,” she said. “Our resilient farms increased cow longevity. Even though it took longer for their cows to reach their break-even, because they weren’t producing as much milk, they stayed in the herd, on average, 150 days longer than non-resilient farms.”
The final determining factors setting resilient farms apart from the others were ultimately found to be seeking educational opportunities; having a plan; building a team of experts; and maintaining working capital.
“These had the largest positive impact on resiliency across all of the farms,” Roberts said. “On top of an educational team approach, resilient farmers had a plan and they stuck with it. Maintaining that working capital per cow was really important for our resilient farms.”
Dairy farms versus dairy-and-crop farms were not significantly different in resiliency. Seven of the 24 resilient farms were dairy-and-crop farms. Rented versus owned acres also were not statistically different on resilient farms. Off-farm income was factored into finances, and most of the farms in the study did have off-farm income to help support the farm.
This study was designed to see if dairy farm resiliency was a result of herd management and/or farm finances and to determine what factors influenced resiliency on dairy farms.