Subsistence farming, by dictionary definition, is “a system of farming that produces a minimum and often inadequate return to the farmer.” This is common practice in developing countries, but could that definition also be used to describe how many dairies in the U.S. have operated for the past several years? It’s as if we are in a first-world country that expects dairy farmers to survive on a third-world business model.
Paul pauly
Complete Management Consulting

On the other hand, sustainable farming, as described by the USDA’s National Institute of Food and Agriculture, encompasses goals such as increasing profitable farm income and enhancing quality of life for farm families and communities, while increasing production for human food and fiber needs.

Which definition do you want to define your farm: subsistent and sustainable? If your vision is to continue dairying, you must figure out how to move away from subsistence and toward long-term sustainability. This requires adapting a mindset that is both analytical and action oriented, as well as creating habits that will move your dairy operation forward.

Incorporate the following five habits to create a sustainable future for your dairy:

  1. Know your costs. With a solid, accurate handle on your costs, you can look at ways to reduce expenses and, subsequently, increase cash flow. Specifically, analyze the numbers in areas of the operation like shot administration, insemination, hoof trimming, calf and heifer raising and custom work. In some cases, bringing such services in-house can be a way to reduce expenses when the labor force is available. Other times, the opposite is true. You may be able to reduce labor costs by completely outsourcing the aforementioned tasks. On an annual basis, reevaluate these costs.

  2. Set cost-reduction goals and communicate them to all team members. For example, you may set the goal of reducing bedding expenses by 10%. Sit down with the key people in charge of this area. Together, discuss ways to tighten up the process, reduce waste and make it more efficient. If they say it can’t be done, spend time on the job with those employees to observe the bottlenecks and inefficiencies. Together, come up with a plan to overcome those obstacles and meet the cost-reduction goal.

  3. Prioritize debt repayment. If 2020 milk prices have more income coming into the operation, focus first on paying down debt and cleaning up accounts payable. If you have a laundry list of debt, look at the worst ones and evaluate interest rates. You may actually be able to negotiate for lower interest rates. Often times, paying off the lesser debts can help relieve some monthly cash flow to actually pay more on the bigger debts.
  4. Shop around for the best deals. Brand loyalty may come at a cost. Look beyond brand names, paint color and which company gives out the best stocking hats. I’ve found great deals on seed, semen, medications and other supplies just by asking peers what they are doing. You may be surprised by the cost savings when you purchase less-common brands of comparable quality.

  5. Don’t settle for complacency. In order to move your dairy operation forward, you must diligently look for ways to improve. This means marketing yourself to the milk plants. Find out what they want and do whatever it takes to be a preferred patron. Make the milk that yields the plant the highest quality and volume of end products, take excellent care of cows, reduce use of antibiotics and establish an image for your farm that communicates gold standards.

To set up your dairy operation for a sustainable future, these suggestions aren’t just something to do once. They are ongoing habits to incorporate into the management and philosophy of the dairy, and they just may be what makes the difference between a subsistent or sustainable dairy business in the years to come.  end mark

Pauly Paul