Cutting costs from items with the largest economic impact on the cost of production can negatively impact milk production. Let’s take a look at some of these “operating” costs for dairies in the Upper Midwest and where does it make the sense to attempt to save money.
The number one single expense in dairies which used to represent 50% of the cost of production. This still holds somewhat true for the “total” cost (includes depreciation of equipment, opportunity cost of land, taxes, etc.). Today feed constitutes roughly 55% of the total, but up to 77 % of the operating cost! Purchased feed represents 45% of the total with 55% for homegrown feeds. Favoring homegrown feeds reduces the feed bill. It requires machinery that depreciates, however depreciation represents around 12.5% of the “total costs” of production, whereas feed purchases at 25% of the total are twice as high. Do you feed 17% or more crude protein diets? You can bring this down to 16 and still be at 90 pounds of milk provided you have the adequate bypass protein. Feed forages with highly digestible fiber (NDF digestibility between 65 and 75%) this will reduce the grain bill.
Hired labor is the second largest component representing 6% of operating costs. “One employee for every 50 cows” was the benchmark in the past. Modern dairy operations however, can handle 100 cows per employee. These dairies expect nowadays to have in excess of 1 million pounds sold per full time employee, a figure more than twice that suggested in the past. Remember however that saving insignificant amounts of money in labor might negatively impact cow health, increase mastitis, and increase somatic cells. This will reduce your paycheck and increase the veterinary bills.
Health and Veterinary costs
The third largest item of operating costs at 4% of the total. The old saying: “Good hay keeps the vet away” is today a little more complex. However, the meaning still holds. “Spend a lot of money in the animal group that uses the least of it”. Calves are the future of the farm and management and feeding programs can make or break a dairy. Management practices and technologies developed recently prevent costly veterinary interventions. Assessing rumen activity and health in commercial dairies can nowadays be done through electronic monitoring of cud chewing. A useful and practical technology, it tracks chewing and the cow’s activity simultaneously, preventing health problems and improving breeding.
Bedding only represents 3% of the operating cost. A cow spends up to 15 minutes a day in the parlor and ideally 12 hours lying down in her stall. Does it make economic sense trying to save money by skimping on clean dry bedding?
Fuel, lube and electricity
It constitutes roughly 4 % of the costs. Dairies use approximately 1,000 kilowatt-hours (KWH) per cow yearly. That could be between $80-120 per cow depending on the farm. Half of the electricity used goes towards milk harvesting (cooling, pumps, etc.); the remaining is split equally between lights and fans, with minor expense due to manure handling and feeding equipment.
It makes sense to spend money wisely on feeds and feed ingredients. After all, they still represent the largest single item in the cost of milk production in US dairies. However, to capitalize on these savings it usually means investing first. Investing in what? Good quality feed and sound technical advice. If these two areas are addressed, there will be associated savings in veterinary and herd health expenses.