Top Strategies for the Most Profitable Dairies

1:42

John, in your experience, what are the top three characteristics of the most profitable dairy farms?

Dr. John Ellsworth

I would say number one, high milk production.

Number two, I say a successful strategy is limiting the ratio of heifers to cows to 80% or 85%.

And number three, solid cost control. When we talked about the high milk production, it doesn’t matter how much you make. It’s how much you keep.

4:33

Can you expand a bit more on the link between profitability and herd-level production?

Dr. John Ellsworth

Let me over simplify this: If we are at 65 or 70 pounds on Holsteins. We just don’t generate enough revenue to cover the costs. And I’m not talking about the period in the last two years of high commodities and high feed costs. I’m talking about in general. If we don’t have the cash inflow, we’re not going to cover the cash outflow. And that is never a good thing.

10:11

I was hoping to talk about was the concept of measuring things so that you can control them. Could tell us more on that concept so that it continues to gain traction it deserves?

Dr. John Ellsworth

The whole concept really holds for almost anything in life you want to measure, or that you can measure. It basically says, if you can measure it, you can understand it. And then some. Think about that. If we can understand it, then we can control it. And ultimately, if we have control over it, we can improve it. So, if you can control something, you’re able to make it better.

16:00

What were some of the other key points that you’d like to leave with the audience today about profitability and milk production on their dairies?

Dr. John Ellsworth

I think if you really step back and look at any operation, I think just about everything’s going to go up. So assuming the milk prices stay up, the profits are going to be based on how well you do control these costs. 

You know, it’s been a year since we’ve seen prices as high, it may be a good time to think about some price protection. Because the fees for put options and things like that on no crisis should be lower than they have been in the recent past. And I think there’s some volatility in the market. But the cost of those put options is really based on how far out they go, what price level you set, and the volatility of the market.

I think it’s going to be a great year for dairymen. But it’s going to be a better year for those that really watch their costs as best as they can. And you mentioned earlier, and I meant to hit on this again, I think the nutritionists, for example, and the veterinarians, they don’t only offer what they did 20 years ago in terms of services. They give another set of eyes on the operation. They start looking at cow comfort freestall maintenance, etc. But I think it’s going to be a very positive year. And I wish the best of everything to our listeners today and hope they have a successful year.