Key Factors to Success

Don Rogers, a keynote speaker at the Ohio Dairy Conference, suggests 10 key factors for success in the dairy industry.

1. Herd size. It's not that you are big or small, but rather that you are sized to match your resources efficiently. Herds of less than 100 cows should focus on maintaining low capital inputs, family labor, and not fancy facilities in a one crop system. Herds larger than 200 cows must focus on capital, labor and facilities efficiency. Herds in the 100 to 200 cow size appear to be in a very awkward situation and should either downsize or expand.

2. Herd Production. Again, balance is emphasized. Aggressive managers can target 24,000 lbs/cow using bST and three milkings/day. Herds can also be successful at less than 20,000 lbs/cow with two milkings per day and no bST by using management intensive grazing, for example. The point is that herd production should be in relationship with the production intensity (input costs).

3. Labor efficiency. This measure is very important to the bottom line. Reasonable benchmarks are 800,000 lbs. of milk per worker with total labor costs 15% or less of milk sales.

4. Cost control. This is the number one measure. We need to remember that the dairy industry is primarily a wholesale manufacturing business. When you produce and sell at the first stage of the food chain, your main driving factor is to produce at the lowest cost per hundredweight. All dairy managers should know their costs per hundredweight.

5. Investment/cow. Too much high-priced land, fancy equipment and facilities will make it very difficult to get any return. Goals should be:

* Equipment: < $1,200/cow

* Land and facilities: <$3,500/cow

6. Replacement program. The following goals should be met at a reasonable cost:

* Calf mortality < 5%

* First freshening < 24 months

* Body weight > 1,200 lbs at calving.

7. Reasonable culling rate. The ideal culling rate 28 to 32%. Voluntary culling is another important measure. Half or more of the cullings should be for low production, not because of poor feet or such.

8. Risk management. We have seen some wide savings in dairy profitability. Add to this weather and disease uncertainty and the risk tolerance level is very critical to long run financial strength. These are responsible risk levels:

* Debt/cow under $2,500 when not in expansion mode.

* Debt/cow during expansion phase should not be over $3,500/cow for more than 3 years.

* Net worth should always be over 50% of total assets and above 40% during expansion.

9. Quality of life. Being tired and burned out all the time is not healthy. It results in mistakes, labor problems and divorces. You and your employees need time off, vacation and profit- sharing.

10. Leadership. Put simply, leadership is simply taking charge of your destiny. To be effective, you need to know where you are going and prepare diligently to get there. People love to be led by someone who has their act together. At a dairy seminar, a herdsperson asked "The biggest problem is the owner - how do we replace him?"

Normand St-Pierre 
Dairy Extension Specialist