I have been an active practicing dairy veterinarian in Wisconsin for the past 45 years.
From 1960 until 1995, many changes slowly occurred in the traditional dairy industry. Changes were many, but slowly accepted. Hybrid corn, silos, artificial insemination, teat-dipping, dry cow therapy, immunizations, pregnancy herd checks and increases in herd size all slowly gained acceptance. The basic business model existing during that time frame until the early 1990s was as follows: Sell milk at $12 per hundredweight, costing $10 per hundredweight to produce, yielding a net profit of $2 per hundredweight (average herd size 75 to 100 cows).
As a few new business persons got involved with the dairy industry, things changed. If we milk 1,000 to 2,000 cows, we can sell milk for $1 per hundredweight or less and make more money than we did with 100 cows. The explosion began. Through better management, herd sizes increased, total herd production jumped from 20,000 pounds per year to 28,000 to 30,000 pounds per cow per year, herd health improved and somatic cell counts (SCC) went down, as new technology, new management styles and innovation took place.
Most traditional dairy farms, (less than 300 cows) will be replaced by an organization called a “dairy business center” in the next 10 to 15 years. What is a dairy business center (DBC)?
A DBC is a milk production business unit. I am involved in DBC with 7,000 cows, several with 3,000 cows and numerous 2,000-cow operations. Presently in Wisconsin, in the planning stages are several more 7,000- to 8,000-cow DBCs. The concept involves an intense understanding of accounting, business principles, use of monies, payback on investment and business based upon economy of scale. While I was at a DBC recently, a semi-trailer of teat dip arrived (an example of economy of scale).
Basically the cow becomes an investment commodity – how much do I put in, how much do I take out, and what is my return on investment? Computer models using the following information are presently being developed to help dairy business managers: What number lactation, what quadrant of lactation, age, pregnancy status, days in milk, present, past and future expected milk production, somatic cell count information, present and past medical history, projected cost of treatment, probability of recovery, length of time for recovery and cost of lost milk?
This information must be interpreted by the herd manager or his delegated representative and a business decision made based upon economics, not veterinary or dairy husbandry skills. Business management teams at my DBC keep telling me how frustrating it is for them to do hands-on management of the dairy cow. Many of them consider their time worth $150 an hour while making business management decisions, and I am out chasing or injecting cows. Many new management tools are on the horizon for implementation in a DBC.
New technology is being developed to improve dairy cattle conception rates via new sophisticated technology using temperature data to better determine time of breeding, or maybe not to breed and save semen cost. New, better, rapid, sophisticated methods of cow identifications and location, beyond present RFID wand readers, will soon be available.
On the horizon is new technology for the use of dairy cow manure, including using advanced technology in methane digesters to not only produce electricity for farm use but selling extra electricity to the electrical grid, using the dried byproduct of a digester for bedding and selling potting soil.
Dairy cattle manure is about 93 percent water. New methods will emerge to take digester effluent purify and scrub it until half of the water is distilled water and the other half is cleaner than rain water. Technology will be used to employ heat from digesters to grow algae, and then harvest the algae and extract from it biodiesel fuel or use some of the water and heat from the digester to grow tilapia fish. Using these types of technology, one Wisconsin dairyman has a goal to have as much profit from the digester as he does from the milk produced at his DBC.
A DBC is an amazing operation to anyone knowledgeable in business manufacturing. DBC owners and operators all possess the following characteristics:
1. Ability to handle and account for vast sums of money
Most knowledgeable persons with whom I have consulted agree our industry will soon require more profit, return on investment and a retirement benefits for owners and investors. Presently in Wisconsin, a turnkey 2,000-cow dairy operation requires an investment outlay of approximately $14 million.
2. Ability to handle, control and direct 2,000 cows’ husbandry by persons fluent in at least one other foreign language
On some DBCs, they do not use a dairy veterinarian. Their foreign help has been trained to do all the work of a veterinarian, including displaced abomasum (DA) surgery, C-section, teat surgery, pregnancy checks, administration of all medications and reproductive drugs. On several of these farms, the surgical procedures and prognosis after surgery is impeccable.
3. Ability to effectively deal with all types of consultants
With advanced technology, one has to rely upon a new type of veterinary consultant who is also a teacher and educator, coupled with the advanced business knowledge similar to that of an MBA accountant. DBCs also have consultants from pharmaceutical companies, dairy equipment manufacturers, nutritionists, agronomists, soil consultants, construction company managers, specialized attorneys and perhaps an accounting firm specializing in DBCs. All of whom are calling on them with accurate up-to-date information.
The manager of a DBC has to process all this information. They have too much information to filter and must depend upon a management team for advice and help to make the right decision. Each decision must properly fit into their business plan.
As I become more involved with the business aspects of agriculture, I make the following observation. The CEO and/or chairman of the board demands a business plan. They depend on each division to accurately fill in the details. When the business plan arrives on the desk of the CEO or chairman of the board, he only looks at the last line – profit or loss, and how much. The details of the business plan are provided by his trusted advisers and consultants. This same procedure is being followed at DBCs throughout the country.
4. Ability to develop and maintain a 23-hour milking operation without flaw
When explaining the milking operation to someone not familiar with a DBC, they are awestruck. Cows are grouped in pens of 200 to 300 cows, depending upon the size of milking parlor. After the 200 to 300 cows are pushed by a cow pusher up to the milking center, someone cleans the floors, someone makes the beds, feed refusal is collected (if weighed they are able to predict pen milk the next day) and mangers are swept, new feed arrives and is placed in the mangers.
Four hours after new feed arrives, feed not eaten is mechanically pushed back into the mangers. This process goes on three times each day for each pen. For 2,000 cows, there are usually eight to 10 pens or barns, day and night, day after day, continuously, everyday. If one procedure in one collective pen goes astray, the whole process is in disarray, and much frantic reorganizing is required. Remember this process involves not only foreign nationals, but also unpredictable bovines, who are gentle but have individual minds and actions.
If you plan on being in the dairy business to make money and have a profitable fiscal future, begin honing and developing the four basic skills required to own and operate a DBC. The future is bright for those who do. Many persons who presently own cows and do not develop the skills required to own and operate a DBC will be dairymen of the past. When one looks at the implementation of new technology and rate of acceptance on a DBC, dairy is the fastest-changing industry in the U.S. today. PD
Roger W. Meads
Milk Smart Inc.