Help your practice grow by helping your clients manage

Last year our purchased feed costs ran over $6 per hundredweight of milk. That number is just killing us. You've got to find a way to get that down, or we're going to be out of business."

Charles E. Gardner

This urgent message was delivered by an owner of a 600-cow dairy farm after he had reviewed 2003 expenses.

The cause of the financial difficulty was enough to pinpoint. The tougher task was being diplomatic enough to tell him the problem resides in his operation.

I knew the problem was internal to the farm because the rations I formulated during that year called for purchased feed to cost somewhere around $2.36 per cow per day. His cows had averaged around 65 pounds of milk per day most of the time, so doing the math yields a figure of roughly $3.50 per hundredweight of milk. Even after allowing for reasonable "shrinkage," and adding in the costs for dry cows (he raises no replacements), his costs should have been under $4 per cwt. For him to be reporting an amount over $6 meant that either his bookkeeping was wrong, or someone was wasting a lot of feed.

Not the first time

This is not the first time I have encountered this situation. When I was still in practice, I balanced rations for a client who always had extremely good forages. When I showed him the feeding program, I made sure I pointed out that his purchased feed costs were quite low. Yet when we reviewed his financial reports at the end of a year, he consistently had very high purchased feed costs compared to other clients.

The problem on both of these farms, and on many others, is that this is a "disconnect" between the production side of the operation and the financial side. In other words, the person paying the bills does not have a clue regarding how much feed should be purchased, and the person doing the feeding never sees the feed bills.

Obviously, the owner or manager should monitor both sides and see that they are reasonably close, but this is often overlooked.

While this fact represents a weakness on some dairy operations, it also marks an opportunity for dairy practitioners who seek additional ways to serve their clients. If you are such a practitioner, start asking your producers if they know how much their feed bill should be each month, based on the rations they are feeding. Most will not be able to tell you.

This in turn gives you the opening to devise a program that will predict feed use from the ration and then track what the feeder puts in the mixer. These two values can be compared, and then further evaluated against actual feed purchases.

Put it in a spreadsheet

For you to provide this service, you do not have to be doing the ration formulation. You do need to be competent with a computer spreadsheet program. Figure # 1 shows a printout from a possible program.

The upper set of numbers is labeled "predicted values." The shaded areas are cells where either you or your client will enter data from the feeding program formulated by the farm nutritionist and from forage tests. Needed values include dry matter percents, prices and pounds of dry matter to be fed per cow per day. After this information is entered, the spreadsheet will calculate how much of each ingredient should be used per month if the cows eat exactly what is formulated.

Of course cows do not do this. Most farms feed a total mixed ration to consumption, meaning that the amount of total ration is increased until the cows do not quite eat it all. The proportion of each ingredient remains the same, so that the composition of the ration does not change.

The second set of numbers, labeled "actual", reflects what the feeder actually mixed and fed. One final row allows for recording of feed that was not consumed (refusal).

The spreadsheet in Table 1 will allow the producer to compare what his feeder says he or she is doing to the ration formulated by the nutritionist. If they vary by more than 10 percent, the nutritionist needs to be consulted so that the ration formulation can be adjusted. This information is quite valuable. However, one more step needs to be taken to really use the information in the spreadsheet. That is to compare the amounts the feeder claims to be feeding to inventories and feed bills.

Disappearing feed

On the farm I described above, we soon learned that purchased feed was disappearing far faster than was being accounted for by the information being provided by the feeder. Further investigation showed that this person was very careless when loading grain, and often added significantly more than he recorded. This finding led to the feeder being replaced, and soon after that purchased feed costs declined significantly.

With a few more cells and inputs, the spreadsheets shown in Table 1 can be expanded to show pounds of milk per pound of dry matter intake, feed costs per cwt of milk produced and income over feed costs.

All of these numbers are important to really manage a dairy farm, but many producers do not know what they are. Again, this is where you can provide valuable service by getting involved and helping your clients monitor these values. You expand that service by helping them interpret the numbers, and making decisions based on them.

Dairy farming is an extremely competitive business. Any time you can help them improve their efficiency, you help them survive, and in turn increase demand for your services. If you charge appropriately, you both win. Look for these types of opportunity. They really do exist.